Series 7 (5)

working capital

Working capital is the difference between a company's current assets, like cash, accounts receivable (customers' unpaid bills) and inventories of raw materials and finished goods, and current liabilities, like accounts payable. Working Capital = Current Assets - Current Liabilities

debt to equity ratio

shows the proportion of equity and debt a company is using to finance its assets and the extent to which shareholder's equity can fulfill obligations to creditors in the event of a business decline. A low debt-to-equity ratio indicates a lower amount of financing by debt via lenders versus funding through equity via shareholders. A higher ratio indicates the company is getting more of their financing from borrowing which may pose a risk to the company if debt levels are too high. debt to equity = total liabilities / total shareholders' equity

quick ratio

The quick ratio is an indicator of a company's short-term liquidity, and measures a company's ability to meet its short-term obligations with its most liquid assets. Quick ratio is calculated as follows: Quick ratio = (current assets - inventories) / current liabilities, or Quick ratio = (cash and equivalents + marketable securities + accounts receivable) / current liabilities The quick ratio is also known as the acid-test ratio.

1. Current Ratio 2. liquidity ratio

1. The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations. To gauge this ability, the current ratio considers the current total assets of a company (both liquid and illiquid) relative to that company's current total liabilities. The formula for calculating a company's current ratio is: Current Ratio = Current Assets / Current Liabilities 2. Liquidity ratios measure a company's ability to pay debt obligations and its margin of safety.