Professional Documents
Culture Documents
Current Assets
Liquidity Ratios Current Liabilities
Shows a firm’s
For Basket Wonders
ability to cover its December 31, 2007
current liabilities
with its current $1,195 = 2.39
assets. $500
6.4 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
Liquidity Ratio
Comparisons
Current Ratio
Year BW Industry
2007 2.39 2.15
2006 2.26 2.09
2005 1.91 2.01
Ratio is stronger than the industry average.
6.5 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
Liquidity Ratios
Balance Sheet Ratios Acid-Test (Quick)
Total Debt
Financial Leverage Shareholders’ Equity
Ratios
For Basket Wonders
December 31, 2007
Shows the extent to
which the firm is $1,030 = 0.90
financed by debt. $1,139
6.8 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
Financial Leverage
Ratio Comparisons
Debt-to-Equity Ratio
Year BW Industry
2007 0.90 0.90
2006 0.88 0.90
2005 0.81 0.89
BW has average debt utilization
relative to the industry average.
6.9 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
Financial Leverage Ratios
Balance Sheet Ratios Debt-to-Total-Assets
Total Debt
Financial Leverage Total Assets
Ratios
For Basket Wonders
Shows the percentage December 31, 2007
of the firm’s assets
that are supported by $1,030 = 0.47
debt financing. $2,169
6.10 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
Financial Leverage
Ratio Comparisons
Debt-to-Total-Asset Ratio
Year BW Industry
2007 0.47 0.47
2006 0.47 0.47
2005 0.45 0.47
BW has average debt utilization
relative to the industry average.
6.11 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
Financial Leverage Ratios
Balance Sheet Ratios Total Capitalization
(i.e., LT-Debt + Equity)