Accouting Speech or Presentation Example | Topics and Well Written Essays - 1000 words

Accouting - Speech or Presentation Example The formula to calculate dividend yield ratio is dividends per share divided by market price per share. Dividend yield ratio = $1.50 / $60 = 2.5%. d) The price-earnings ratio is an index that shows whether a stock is relatively cheap or expensive in relation to its earnings. The formula to calculate the price-earnings ratio is market price per share / EPS. Price-earnings ratio = 60 / 7.8 = 7.69. The book value per share is lower than the market value per share by $20. This figure does not necessarily reflect that the stocks of the company are selling at a bargain price. The book value per share reflects the amount that would be distributed to investors if all assets were sold at their balance sheet values after paying off the creditors. a) The current ratio is calculated dividing current assets by current debt. Current ratio = 1,120,000 / 600,000 = 1.87. The current ratio shows the ability of a company to pay off its current debt. A general rule for the current ratio is that if the ratio is above 1.0 it is good. The company is in a good position to pay off its current debt. The current ratio of the firm is below the industry average of 2.1. b) The quick acid ratio is another solvency metric. It is calculated similarly to current ratio with the exception that inventory is deducted from the numerator. Quick acid ratio = (1,120,000 – 610,000) / 600000 = 0.85. The quick acid ratio of the company is below the industry average of 1.2. e) The debt to equity ratio is a measure of the amount of assets being provided by creditors for each dollar of assets being provided by the stockholders (Garrison, et. al.). The ratio is calculated by the following formula: total liabilities / total equity. The purpose of the ratio analysis performed was to determine whether Stephens Company qualifies for a $500,000 loan. The broad profitability of the company is a little lower than the