ii
TABLE OF CONTENTS
Unit 1: Financial Statement Analysis
(Continued)
Progress Check 1.3............................................................................. 1-29
Financial Ratios ................................................................................... 1-33
Liquidity Ratios......................................................................... 1-35
Current Ratio ................................................................ 1-35
Quick (Acid-Test) Ratio............................................... 1-36
Asset Management Ratios ..................................................... 1-36
Inventory Turnover Ratio.............................................. 1-36
Average Collection Period.......................................... 1-37
Fixed Assets Turnover Ratio ...................................... 1-38
Total Assets Turnover Ratio........................................ 1-38
Debt Management Ratios....................................................... 1-39
Total Debt to Total Assets Ratio (Debt Ratio) .......... 1-40
Times Interest Earned (TIE) Ratio.............................. 1-41
Fixed Charge Coverage Ratio ................................... 1-41
Profitability Ratios.................................................................... 1-42
Profit Margin Ratio....................................................... 1-42
Basic Earnings Power Ratio ...................................... 1-42
Return on Total Assets Ratio...................................... 1-43
Return on Common Equity Ratio................................ 1-43
Market Value Ratios ................................................................ 1-44
Price / Earnings Ratio ................................................. 1-44
Market / Book Ratio..................................................... 1-45
Using Ratios ............................................................................. 1-45
Unit Summary....................................................................................... 1-46
Progress Check 1.4............................................................................. 1-49
Unit 2: Financial Markets and Interest Rates
Introduction...............................................................................................2-1
Unit Objectives ........................................................................................2-1
Overview of Financial Markets ..............................................................2-2