ACIS-2115 - Reading Notes - 2-2 - Ratios PDF

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Summary

This is a common taught course. All sections of ACIS 2115 follow the same schedule and cover the same content.
Prof: L Almond
Reading for section 2.2...

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Daniel T. Eisert

ACIS-2115

2.2 – Ratios ACIS-2115: Principles of Accounting September 2, 2019 (Week 2)

Ratio Analysis

Expresses the relationship among selected items of financial statement data. - Profitability ratios measure the income or operating success of a company for a given period of time. - Liquidity ratios measure short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash. - Solvency ratios measure the ability of the company to survive over a long period of time. Financial Ratio Comparisons: - Intracompany comparisons covering two years for the same company. - Industry-average comparisons based on average ratios for particular industries. - Intercompany comparisons based on comparisons with a competitor in the same industry.

Liquidity Solvency

Earnings per share (EPS) measures the net income earned on each share of common stock. This helps determine investment return. Liquidity ratios measure the short-term ability of the company to pay its maturing obligations to meet unexpected needs for cash (e.g., the current ratio). Solvency ratios measure the ability of the company to survive over a long period of time (e.g., the debt to assets ratio).

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