The Debt Ratio, Projects The Relationship Between The Total Assets And Total Debts Of The Company Essay

The current cash debt ratio only measures the ability of a firm 's cash, along with investments easily converted into cash, to pay its short-term obligations. In 2007, the company has a current cash debt ratio greater than 1 and is in better financial shape than in 2006, when the ratio was less than 1.

The current ratio shows the short-term debt-paying ability of the company also known as liquidity ratio. Components of the current ratio are current assets and current liabilities. To find the current ratio, divide current assets by current liabilities. For example if a current ratio was 2:1, then that company would be able to pay off its short term debt easily. But you should also look at the types of debt the company has because some assets might be larger. For the current ratio a rule of thumb is the ratio should be around 2:1. The company wants to at least make sure that the value of the current assets covers at least the amount of the short-term obligations. In 2013 the current ratio is 1.75 and in 2014 the current ratio is 1.8. This is showing a favorable

This ratio takes into consideration the current assets and current liabilities from the balance sheet

Debt ratio - The Debt/Equity ratio is a measure of a company 's financial leverage and indicates what proportion of equity and debt the company is using to finance its

6. Debt Ratio: This nifty ratio is found by taking total debt over/divided by total assets. This directly shows the amount of debt a company has relative to its assets.

Solvency ratios: The solvency ratios debt to total assets ratio and times interest earned tells creditors if a company will be able to pay maturing debt and interest. Total liabilities divided by total assets is the debt to total assets ratio. Creditors will determine if a company can pay the maturing debt by the lower the percentage of the debt to total assets ratio the more likely it will be able to pay its debts. The times interest earned is income before income taxes and interest expense divided by interest expense. The result of this ratio will tell creditors and investors the company’s ability to pay interest as it comes due. The higher the result of times interest earned the easier it is for the company to pay their interest.

Leverage ratios examine the organization’s use of debt to finance its assets and its ability to meet the interest payments. Common leverage ratios include debt to assets and times interest earned.

* Debt ratio- a ratio that indicates what proportion of debt a company has relative to its assets. The measure gives an idea to the leverage of the company along with the potential risks the company faces in terms of its debt-load.

The Debt to Total Asset Ratio is a ratio that shows the financial risk of a company by

What is surprising, however, is that despite a 51% increase in long term debt during 2014, Martinrea’s debt to equity ratio actually decreased. A closer look at the notes to the financial statements reveals the cause of this decrease. First, while long term debt increased significantly during 2014, the 12% increase in overall liabilities was less significant. As the result of their purchase of the remainder of Honsel Aluminum, Martinrea removed a liability from their balance sheet which previously represented a put option that could force them to purchase this remaining portion. Martinrea ended up making the purchase before this option was exercised, and the removal of this liability dampened the increase in total liabilities. Second, the acquisition of Honsel significantly removed the equity attributable to a non-controlling interest, causing a 24% increase in equity attributable to the shareholders of the company (despite total equity only increasing marginally). These two factors lead to a decrease in Martinrea’s debt to equity ratio.

When comparing the debt-to-assets ratio of McDonalds and Wendys, you have to divide the firms total liabilities by their total assets. Essentially, the debt-to-assets ratio is the primary indicator of the firms debt management. As the ratio increases or decreases, it indicates the firms changing reliance on borrowed resources. The lower the ratio the more efficient the firm will be able to

The debt ratio for Smith Enterprises indicates that approximately 50% of the company is debt. Although the other 50% is assets, the company should consider a different financial approach.

Long term creditors and shareholders are interested in this part of ratios and very carefully to deal with it. It evaluates how the company is using or managing its debt. Debt asset ratio and times interest earned and times interest earned will be calculated in

Debt ratio helps in comparing total assets and total liabilities. If you have more liabilities it means you have lesser equity and therefore an increased leverage position.

CURRENT RATIO show a company’s ability to pay its current obligations that is company’s liquidity. The current ratio position is lower for Honda at 0.33 than for Toyota at 1.22 in 2010. Honda has a large portion of receivables in assets both in trade, notes receivables and finance receivables. It has a huge portion of cash as well. This indicates the company has no problem in terms of generating a positive influx of assets. But in terms of liabilities it has a large portion of short term debt which makes almost 1/3rd of total Current liabilities. Also there is a significant portion of Long Term debt. The higher level of liabilities in the denominator reduces the overall ratio.