ADM 1340 Chapter 14: ADM1340 Chapter 14.docx

• School: University of Ottawa
• Department: Administration
• Course: ADM 1340
• Professor: Philip Mc Ilkenny

Document Summary

Current ratio: expresses the current relationship of current assets to current liabilities: calculated by dividing current assets by current liabilities, widely used for evaluating a company"s liquidity and short term debt paying ability, disadvantage: uses year end balances that may not reflect the company"s position during most of the year. Debt to total assets: measures the percentage of total assets that"s provided by creditors, calculated by dividing total liabilities by total assets, indicates company"s reliance on debt, high high level of debt and higher risk, low less debt and less risk. Return on common shareholders equity: shows how many dollars of profit were earned for each dollar invested by shareholders, calculated by dividing profit available to common shareholders by average common shareholders equity, ratio that is affected by other ratios, determined partially by the company"s use of leverage and return on assets, which is determined by profit margin and asset turnover.