Financial Professional Ratio Analysis

Financial diagnostic categoriesAMGENPeriod Ending31/12/131.) Liquidity of short-term assets-Current ratio3.44-Cash ratio2.44-Quick ratio3.062.) Long-term debt-paying ability-Debt ratio0.67-Debt-equity ratio1.99-Times interest earned6.153.) Profitability-Net income/sales (profit margin)27-Net income/assets (ROA)8-Net income/shareholder equity (ROE)234.) Asset utilization/ management efficiency-Total asset turnover 0.28 -Inventory turnover measures 6.19 -Accounts receivable turnover 6.92 5.) Market measures-Price/earnings ratio 15.48 -Earnings per common share 6.64 -Dividend payout28 LIQUIDITY RATIOS Liquidity Ratio (LR) measure the short term solvency of the business. LR measures the ability of the business enterprise to meet its short term obligation as and when they are due. The liquidity ratios are also called the short- term solvency ratios. The most common ratios which measures the extent of liquidity or the lack of it are Current ratio Cash Ratio Quick ratio/ Acid test ratio Current Ratio Current ratio measures the relationship between current assets and Current liability. It measures the ability of the firm to meet its short term obligation as and when they become due. Current ratio (CR) Current Assets Current liabilities Interpretation A CR of 3.44 indicates that firm is consistently meeting its Short Term obligations. A CR 1 indicates that Firm enjoys a greater Liquidity Lower risk for Short term Lenders. The higher the ratio , the greater