MGAB01H3 Study Guide - Final Guide: Asset Turnover, Profit Margin, Current Liability
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MGAB01H3 Full Course Notes
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Current ratio: current assets current liabilities indicator of ability to pay off current. Higher the ratio, more cushion for company to pay off current obligations; good liabilities liquidity. Too high ratio means inefficient use of resources. May be misleading measure of liquidity if sig funds tied up in assets that aren"t easily converted to $ Total asset turnover: s ales revenues avgtotal assets how effective mgmt is at generating sales from assets. High means efficient mgmt. , low means less efficient; stronger financial. May seasonally bc fluctuations, but declining ratio can also be bc policy changes. Return on assets: n et income average total assets how well mgmt. used invested capital. Broadest measure of profitability and mgmt. effectiveness. Net profit margin ratio: net earnings net sales ; how effective mgmt. is at controlling performance = during period rev/exp to gen earnings. Decisions mgmt. makes to maintain company"s npm ratio may have negative long.
