FIN 305 Lecture Notes - Lecture 7: Cash Flow Statement, Cash Cash, Current Liability
13 Nov 2015
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Indicators of whether the business will help stakeholders realize objectives: valuation, cash flow statement cash flow, balance sheet liquidity, solvency, analyses: vertical, horizontal, combined, metrics/ratios, graphic using many will reveal best insights. Intra statement ratios: liquidity and solvency (financial risk) Inter statement ratios: efficiency, productivity, return on investment. . 42 in current asset for every owed in current liabilities. Increase in cash amounts but drops in ratio growth in cash amounts is good but decline in ratio isn"t . Management actions based on preliminary liquidity assessment: review historical data: trend, monitor future performance: control, compare to relevant industry benchmark, broaden analysis to related metrics. 2 main approaches/ metrics: debt to total capital/debt equity mix. Total assets were financed by 1/3 equity and 2/3 debt: debt to equity. Debt / total capital = total liabilities / ( total liabilities + equities ) x 100. Proportion of debt has been decreasing reduction in financial risk.
