# Calculate Ratios

The discussion part of the assignment is to discuss how investors will assess the stability of a fictitious company? What are the key financial ratios that measure the stability of an organization? Define stability.

I need help with the part that says, "calculate these ratios" Please see attached.

#### Solution Preview

Please see file attached (also below). I hope this helps and take care.

SOME OF THE ATTACHED RESPONSE:

Solvency ratios measure the stability of a company and its ability to repay debt. These ratios are of particular interest to bank loan officers. They should be of interest to you, too, since solvency ratios give a strong indication of the financial health and viability of your business.

Thus, we will look at the formulas and calculations for the following solvency ratios for your fictitious company, Strident Mark Inc. I calculated the first three for you. The last one, the z score, I left the final calculations for you to compute. I provided the formulas, and the only thing you need to do is to plug in your numbers from the Balance Sheet and Income Statements of your fictitious company (i.e., Strident Mark Inc.) into the formulas. This is in keeping with BrainMass policy that the OTA is not doing the complete assignment for the student.

? Debt-to-worth ratio

? Working capital

? Net sales to working capital

? Z-Score

1. Debt-to-Worth Ratio

The debt-to-worth ratio (or leverage ratio) is a measure of how dependent a company is on debt financing as compared to owner's equity. It shows how much of a business is owned and how much is owed.

The debt-to-worth ratio is computed as follows:

Debt-to-Worth Ratio = Total Liabilities/Net Worth

(A reminder: Net Worth = Total Assets Minus Total Liabilities.)

Strident Mark Inc.'s Debt-to-Worth Ratio ...

#### Solution Summary

This solution discusses how investors will calculate the stability of a fictitious company identifying the key financial ratios that measure the stability of an organization.