COMM 1800 FINAL
Managing Inventory
financial managers want the least inventory possible without harming production efficiency or sales The financial manager's goal is to manage current assets so the firm has enough cash to pay its bills and to support its accounts receivable and inventory. In addition to seeking the right balance between cash and marketable securities, the financial manager tries to shorten the time between the purchase of inventory or services (cash outflows) and the collection of cash from sales (cash inflows). The three key strategies are to collect money owed to the firm (accounts receivable) as quickly as possible, to pay money owed to others (accounts payable) as late as possible without damaging the firm's credit reputation, and to minimize the funds tied up in inventory. The cost of inventory includes not only its purchase price, but also ordering, handling, storage, interest, and insurance costs.
Basadur profile - what does this tell us?
implementer optimizer generator conceptualizer most people in comm are implementers The Basadur Profile helps to develop happy, collaborative teams and individuals that can innovate effectively and sustainably. It does this by analyzing how individuals approach problem solving.
Main Financial Statements
income statement, balance sheet, cash flow statement
A company's efforts to garner favorable publicity for themselves and their products is encompassed by which aspect of the marketing mix?
promotion
Risk
the potential for loss, or the chance that an investment will not achieve the expected level of return
marketing research
the process of collecting and analyzing the data that are relevant to a specific marketing situation.
Capital Budgeting
the process of planning and managing a firm's long-term investments
Class example of T-shirt business
At the beginning of December 2021, you start a business selling t-shirts online. You put $100 of your own money into the business and borrow $400. During December, you sell 100 shirts for $10 each. The shirts cost you $6 each. You have expenses of $300 ($230 salaries, $40 advertising, and $30 website costs).
Business case vs. ethics case
BC: Transactional view Situation 1: "buy the violin for $50 and make a profit" Situation 2: "sell the violin for whatever the customer will pay" EC: Relational view "don't take advantage of others"
Market orientation
Being in alignment with the external environment in a way that optimizes collective value.
Cost of goods sold vs. operating expenses
COGS includes direct labor, direct materials or raw materials, and overhead costs for the production facility. Cost of goods sold is typically listed as a separate line item on the income statement. Operating expenses are the remaining costs that are not included in COGS. oe: costs to keep business up and running
Tender Greens case discussion: what are tradeoffs and how did these factor into this case?
CSR expensive or cheap meat
Ratio analysis - know what each of the following categories and/or ratios are and what information they tell us (I will not ask you to calculate these on the exam):o Liquidity ratios - current and quick, and net working capital (not a ratio) o Profitability ratios - net profit, ROE, EPSo Activity ratio (inventory turnover)o Debt ratio (debt-to-equity)
Financial statement numbers provide insight into the company's operations, profitability, and overall condition Ratio analysis, using data from financial statements, gives even greater insight Compare ratios to: past performance, industry averages/norms, competitor's ratios
success trap
Focusing on only exploitation:
Perpetual search trap,
Focusing on only exploration
GAAP
General accepted accounting principles (us public cos) SEC: securities and exchange commission Founded during Great Depression Mission: Protect investors Maintain fair, orderly, efficient markets Facilitate access to the markets for entrepreneurs and companies
Gross vs. net
Gross is the total amount before any deductions are made. Net is the amount after deductions are made. this can include tax
commercial paper
IOU issued by a financially strong corp
theranos
In the trial, the prosecution argued Elizabeth Holmes, founder and CEO of Theranos, "took shortcuts to try to keep her company solvent and lied to keep investor money flowing" The defense argued that while Elizabeth Holmes made some mistakes, "failure is not a crime"
activity ratio
Inventory turnover: How quickly does a firm convert inventory to sales?
Volkswagen
It's been dubbed the "diesel dupe". In September, the Environmental Protection Agency (EPA) found that many VW cars being sold in America had a "defeat device" - or software - in diesel engines that could detect when they were being tested, changing the performance accordingly to improve results. The German car giant has since admitted cheating emissions tests in the US.
Legal vs. ethical
Law: How not to behave Minimum standard Sometimes ambiguous, and evolves over time (politics, interpretation, legal precedent, etc.) Moral or ethical concerns that are not "illegal" can form the basis of new laws and policies gap between what is legal and what is ethical; reactive and adversarial
• Primary vs. secondary data, and common ways to obtain primary data
Marketers generally begin by looking at secondary data—information already collected, whether by the company or by others, that pertains to the target market. (US census bureau) With secondary data in hand, they're prepared to collect primary data—newly collected information that addresses specific questions. (surveys, personal interviews, focus groups)
IFRS
Most other countries use IFRS (International Financial Reporting Standards) If Non-US-based companies list on US exchanges, they can report using IFRS
Stakeholder mapping/analysis
New business models Decisions Projects Change Crisis Identify all stakeholder groups Categorize groups Define each group's specific needs/concerns/etc. Prioritize stakeholders Power x interest Determine response/action active allies: already leading/taking actions to support your position passive allies: have an interest in supporting you neutral: may not be involved in supporting your position but could be passive opposition: may oppose your position active opposition: are likely to actively interfere with your actions stake holder mapping graph look up; x=interest, y=power
Orthodoxy as it relates to innovation
Orthodoxy essentially means traditional, so if your company always operates in an orthodox(the same) way then they are not trying to be innovative. business models can be innovative
Purpose: How does purpose relate to CSR?
PURPOSE AS DISGUISE:Professed purpose/mission covers up questionable business or even misconduct PURPOSE ON THE PERIPHERY:"Doing good" is kept separate from the core business ("doing well") PURPOSE AS WIN- WIN: Where economic and social benefits intersect (and only when they intersect) DEEP PURPOSE: Deep commitment to both economic and social benefits; "practical realism"
What are the components of the triple bottom line?
People, Planet, Profit the economic and also the social and environmental results of their actions Social (externality): employee wellbeing, fair trade, community stakeholder Economic (externality): revenue, growth, cost Environmental: land use, carbon footprint, waste external stakeholders consider it a corporation's responsibility to go beyond making money. Society, businesses, and governments have realized that all stakeholders have to work for the common good. can ultimately lead to the development of a sustainable economic system.
• Marketing mix (4 Ps) - what does each encompass?
Promotion: Promoting the product—informing potential buyers about it Product: Developing a product that meets the needs of the target market Price: Setting a price for the product Place: Distributing the product—getting it to a place where customers can buy it
What does the SEC require of public companies?
Public Co. Reporting: Annual reports (Form 10-K) Quarterly reports (Form 10-Q) Current reports (Form 8-K): "major events that shareholders should know about" Departure or appointment of members of the Board of Directors or company Officers (e.g., CEO) Bankruptcy Change in public accountant The SEC sets the disclosure requirements: the topics that all companies must cover in their 10-Ks or 10-Qs how the information should be presentedCompanies cannot: Make material false/misleading statements Omit material information A company's CFO and CEO must certify to the accuracy of the 10-K and 10-Q Quarterly reports must be REVIEWED by external auditors Annual reports must be AUDITED by external auditors The SEC does not vouch for the accuracy of a 10-K or 10-Q
Separation fallacy vs. integration thesis
SF: view that ethics is about avoiding illegal practices (don't lie don't cheat don't steal) IT: view that ethics is about choosing between alternatives in a way that benefits stakeholders; business and ethics are connected like art
Shareholder primacy vs. stakeholder theory
SP: Economist Milton Friedman: "There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud" ST: A firm should create value for all stakeholders Stakeholders are interconnected Stakeholders: customers, suppliers, employees, investors, communities, etc. A central consideration in business ethics From shareholders to stakeholder Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations.
marketable securities
Short-term investments that are easily converted into cash.
Course concepts as they relate to marketing: stakeholders and triple bottom line
What stakeholders make up a company's external environment? Communities, customers, competitors, regulators, suppliers, channel intermediaries, and the natural world, among others What is marketing? The act of generating, disseminating, and responding to market intelligence to optimize the triple bottom line.
private branding
With private branding (or private labeling), a company makes a product and sells it to a retailer who in turn resells it under its own name. A soft-drink maker, for example, might make cola for Wal-Mart to sell as its Sam's Choice Cola.
manufacturer branding
a company sells one or more products under its own brand names
Stakeholder Management
a firm's strategy for recognizing and responding to the interests of all its salient stakeholders
customer-relationship management
a marketing strategy that focuses on using information about current customers to nurture and maintain strong relationships with them
What gets disrupted? Or in other words, what is necessary for disruption?
abandoned big enough break through tech two sided market tech (Uber) management consulting you need management and creative thinking to be successful (comedians)
short term expenses
accounts payable, accounts receivable, inventory
• Brand equity
added value generated by favorable consumer experiences with a product.
balance sheet
assets (resources), liabilities (obligations), owner's equity (difference between assets and liabilities) firm's financial position at a specific point in time
multi-branding
company assigns different brand names to products covering different segments of the market. Automakers often use multi-branding. The Volkswagen group of brands also includes Audi and Lamborghini.
Violin dilemmas music store; Information Asymmetry
"In this case, the transaction is in a music store. This time you don't know anything about violins, but you want to buy one to learn to play. The store owner brings you one with a $500 price tag and says, 'This one will do just what you want it to do.' Unknown to you, this violin is cheaply made and not worth anywhere near $500. You buy the violin." Has the store owner done something wrong? 1. Wrong: store owner wrong to take advantage of customers 2. Not wrong: Price reflects value perceived by buyer Caveat emptor: "let the buyer beware" Hallmark of capitalism and the legal system "seller could decide to work with the customer over time, selling an inexpensive violin initially, but also pointing the customer to lessons and, eventually, a more expensive, but worthwhile, violin."
enron
"What Enron really excelled in was using the existing rules and regulations as a roadmap of the possible. And I've described it as a "legal fraud," because so much of what they did was actually legal, even though it created this edifice where the financial statements had no bearing on economic reality." Rules vs. Principles "I found every way I could to technically comply with the [accounting] rules . . . But what I did was unethical and unprincipled. And it caused harm to people. For that, I deserved to go to prison."
Violin dilemmas yard; Information Asymmetry
"You're at a yard sale and pick up a violin. The tag says $50. Let's imagine you actually know quite a bit about violins, and you know that this particular violin, if it were auctioned, could yield close to $1 million." Should you tell the owners, or should you buy the violin and sell it yourself? Situation 1 (yard sale) 1. Tell the owners 2. Buy it to sell yourself: Price reflects worth to sellers Windfall outweighs sense of guilt "the buyer could act as an agent for the sellers, who clearly don't know much about violins."
Accounting flow of information
- A business entities undergoes activities - Internal accountants codify information about the activities - External accountants (auditors) verify that the information is prepared correctly - External decision makers access and use information
generic branding
.With generic branding, the maker attaches no branding information to a product except a description of its contents.
Toys R Us case discussion: what factors contributed to the downfall of Toys R Us?
1.Competition from big box retailers (Walmart and Target; priced toys lower) 2.Amazon: Its early partnership with Amazon, in which online sales were directed to Amazon Failed partnership 3.Store experience 4.Online experience 5.Debt resulting from leveraged buyout 6.Failure to innovate
What kind of improvement is needed for a company to differentiate performance?
10% satisfaction level increase relative to expectation
risk-return tradeoff
A basic principle in finance is that the higher the risk, the greater the return that is required
What is stakeholder theory?: Its origins and where things stand today
A firm should create value for all stakeholders Stakeholders are interconnected Stakeholders: customers, suppliers, employees, investors, communities, etc. A central consideration in business ethics everyone is important and connected Ed Freeman: UVA Darden "Commonly referenced as the foremost scholar on stakeholder theory and business ethics" 1984 book: Strategic Management: A Stakeholder Approach
Principles vs. rules
Actions that "toe the line," or fall into a gray area, where there may be a lack of clarity or consensus on principles; then Violation of principles but not necessarily rules (e.g., loopholes); then Fairly clear violation of both rules and principles
Four hallmarks of active inertia and what each entails
Active Inertia: tendency to follow established patterns of behavior, even when the competitive environment shifts strategic frames/ blinders: set of assumptions that determine how managers view the business processes/ routines: the way things are done relationships/ shackles: ties to employees, customers, suppliers, distributors, and shareholders values/ dogmas: set of shared beliefs that determine corporate culture
multiproduct-branding
Adopting a multiproduct-branding approach, it sells many products under one brand name.
Annual report - key components, purpose
Annual reports must be AUDITED by external auditors Financial statements are the chief element of the annual report, a yearly document that describes a firm's financial status. Annual reports usually discuss the firm's activities during the past year and its prospects for the future. Three primary financial statements included in the annual report are: The balance sheet The income statement (or statement of operations) The statement of cash flows The primary method of communication with external users is the annual report Some of the key components: Management Discussion and analysis - MD&A External auditor's report Financial statements Footnotes to the financial statements
What stakeholders make up a company's external environment?
Communities, customers, competitors, regulators, suppliers, channel intermediaries, and the natural world, among others.
Ways companies can remain competitive
Continually scan the environment Identify hindrances Bring in outside perspectives Balance exploring and exploiting What is the company supporting and rewarding?
What is CSR?
Corporate social responsibility is the practice by which a business views itself within a broader context, as a member of society with certain implicit social obligations and environmental responsibilities. ethical practices and policies in accordance with the company's culture and mission, above and beyond any mandatory legal standards. cannot have maximizing shareholder wealth as its sole purpose, because this goal would necessarily infringe on the rights of other stakeholders in the broader society. ethical business leaders opt todo good at the same time that they do well. It should also be a good civic neighbor and commit itself to the general prospering of society as a whole. It ought to make the communities of which it is part better at the same time it pursues legitimate profit goals. These ends are not mutually exclusive, and it is possible—indeed, praiseworthy—to strive for both. environment and sustainability and transparency
Debt Ratio
Debt-to-equity: what is the mix of debt and equity? (the lower the better)
What is business ethics?
Determining what is right versus wrong in the business context Identifying defensible reasons for actions Determining how we should conduct ourselves as individuals AND how we should interact with others Understanding the broader context of ethical conduct: Organization, industry, community, nation, globe Clearer Issues: Theft Fraud Harassment Abuse More Subtle Issues: Integrity Fairness RespectDignity Privacy
The marketing discipline's first law
Don't sell what you happen to make; make what the consumer wants to buy
ESG - what is it and what is driving the interest and growth?
Environmental Social Governance Non-financial metrics Not required (yet) No universal standard (yet) Most companies use the standards from GRI (Global Reporting Initiative) Demand from investors ESG investment options: mutual funds and ETFs (exchange traded funds) greatly increased sustainability reporting, might be regulated soon now seen as a necessary tool in shifting capitalism towards a more sustainable model.
What are the three eras of management and how is each characterized/what does each encompass?
Execution: (optimization) rise of industrial revolution mass production, and managerial solutions such as specialization of labor, standardized processes, quality control, workflow planning, and rudimentary accounting were brought to bear. By the early 1900's, the term "management" was in wide use, and Adam Smith's ideas came in to their own developed theories that emphasized efficiency, lack of variation, consistency of production, and predictability. The goal was to optimize the outputs that could be generated from a specific set of inputs. Expertise: (knowledge work) mid 20c Statistical and mathematical insights were imported (often from military uses) forming the basis of the field that would subsequently be known as operations management. Later attempts to bring science into management included the development of the theory of constraints, management by objectives, reengineering, Six Sigma, the "waterfall" method of software development Empathy: modern day quest for empathy extends to customers, certainly, but also changes the nature of the employment contract, and the value proposition for new employees. We are also grappling with widespread dissatisfaction with the institutions that have been built to date, many of which were designed for the business-as-machine era
• Explore vs. exploit
Explore: high uncertainty focus: New ideas and innovation; search for new opportunities financial philosophy: Venture capital style risks CULTURE & PROCESSES: Experimentation and adaptation time horizon: long term exploit: uncertainty: low focus: Efficiency and improvement; refine existing knowledge FINANCIAL PHILOSOPHY: steady returns CULTURE & PROCESSES: planning and predictability time horizon: short term
Follow Dubious Orders case discussion: What made this an ethical dilemma, and what factors added complexities? What could/should Susan do?
Susan: asked to misrepresent herself potentially being asked to violate her own values risks damaging her own reputationrisks damaging her university's reputation Ambiguous situation: legal vs. ethical Susan is not in a position of power New employee; intern Career implications Cultural differences Conflicting advice Ask herself if this is the type of company that reflects her own values Approach the problem in a collaborative and constructive way Address the issue with her manager Find and propose alternate ways to complete the work in a way that aligns with her values If her concerns are ignored or dismissed, she should look for employment elsewhere "I greatly appreciate the opportunity to do this work with you, and this project is quite interesting. However, I'm concerned that if we don't disclose the fact that I'm working for Zantech and the word leaks out, it will reflect poorly on the firm."
Link between stakeholders and ethics
The ethical dimension of stakeholder theory is based on the view that profit maximization is constrained by justice, that regard for individual rights should be extended to all constituencies who have a stake in a business, and that organizations are not only "economic" in nature but can also act in socially responsible ways. To this end, companies should act in socially responsible ways, not only because it's the "right thing to do," but also to ensure their legitimacy. There are several methods for analyzing stakeholder transactions and relationships with an organization.62 Using an ethical perspective, a goal of this approach is for organizations to employ values of transparency, fairness, and consideration of stakeholder interests in strategic decisions and transactions.
• Target market
The specific group of consumers who a company expects to be particularly interested in their product, who would have access to it, and who have the means to buy it
Accounting equation
assets- liabilities= owners' equity Assets are things of value owned by a firm. They maybe tangible, such as cash, equipment, and buildings, or intangible, such as a patent or trademarked name. Liabilities—also called debts—are what a firm owes to its creditors. Owners' equity is the total amount of investment in the firm minus any liabilities. Another term for owners' equity is net worth. must always be in balance recorded twice by double-entry bookkeeping
toyota
balances Exploit: continuous improvements in quality and manufacturing Explore: industry-shaping innovations like hybrid engines
4 types of innovation, especially sustaining and disruptive innovation
breakthrough innovation (problem defined well, domain is not defined): mavericks, skunk works, open innovation/ prizes Well-defined problem that is difficult to solve Often beneficial to seek expertise from OUTSIDE of the team, organization, and/or problem domain sustaining innovation (problem well defined, domain well defined): roadmapping, r and d labs, design thinking, acquisitions This is MOST innovation! Get better at doing/making something we are already doing/making basic research (problem not defined, domain not defined): research divisions, academic partnerships, journals and conferences Scientific and technological discovery The direct goal is NOT: Relevance Practical application Commercialization disruptive innovation (problem not defined, domain defined): VC model, innovation labs, 15%/20% rule, lean launchpad Existing businesses focus on existing customer base This results in the needs of some segments being exceeded or ignored E.g., Copy machines, cell phone cameras blockbuster and Netflix:\ Blockbuster CEO: ...our customer base is very different-our core focus is very different. Their focus is more on the longer-tail titles. Ours has traditionally been on new releases. It's a different business model. Theirs is a subscription model that focuses more heavily on older titles. Blockbuster has a broader range offering. The majority of our business-as much as 80%-has been in new releases.
consumer market
buyers who want the product for personal use
industrial market
buyers who want the product for use in making other products
long term expenses
capital expenditures
Key activities of finance (planning, investment, financing) and what each involves
financial planning: Preparing the financial plan, which projects revenues, expenditures, and financing needs over a given period. investment (spending money): investing the firm's funds in projects and securities that provide high returns in relation to their risks. financing (raising money): Obtaining funding for the firm's operations and investments and seeking the best balance between debt (borrowed funds) and equity (funds raised through the sale of ownership in the business).
Xerox
focused too much on comp sci innovation
Financial Accounting
focuses on preparing external financial reports that are used by outsiders; that is, people who have an interest in the business but are not part of the company's management. Although they provide useful information for managers, these reports are used primarily by lenders, suppliers, investors, government agencies, and others to assess the financial strength of a business.
What is, what if, what wows, what works
foundational approach small what is big what if smaller what wows small what works "What if" builds on the present to envision a new future. "What wows" helps teams focus on solutions that stand out and "What works" tests possible solutions with actual users in the real world.
Corporate finance: How (in what ways) does money flow into and out of a firm?
inflow: owners investment, borrowed funds, sale of fixed assets, cash sales, collection go accounts receivable outflow: purchase of fixed assets, payment of dividends, purchase of inventory, payment of expenses
Failure: internal + external factors
internal and external factors lead to decline then failure
Company lifespan - how has it changed?
it is roughly 15 yrs it has decreased (75 in the 20s, 27 in the 70s)
capital expenditures
land, buildings, equipment
Cash Management
making sure that enough cash is on hand to pay bills as they come due and to meet unexpected expenses.
• Segmenting, common ways to segment, clustering
market segments—groups of potential customers with common characteristics that influence their buying decisions niche market: narrow market segment demographic segmentation: divides the market into groups based on such variables as age, marital status, gender, ethnic background, income, occupation, and education. geographic segmentation: dividing a market according to such variables as climate, region, and population density (urban, suburban, small-town, or rural) behavioral segmentation: Dividing consumers by such variables as attitude toward the product, user status, or usage rate Psychographic segmentation: classifies consumers on the basis of individual lifestyles as they're reflected in people's interests, activities, attitudes, and values Typically, marketers determine target markets by combining, or "clustering," segmenting criteria. What characteristics does Starbucks look for in marketing its products? Three demographic variables come to mind: age, geography, and income.
retailers
marketing intermediaries that sell products to the eventual consumer.
What is marketing? And what do each of the components of the definition entail?
marketing: The act of generating, disseminating, and responding to market intelligence to optimize the triple bottom line. market: suppliers, competitors, customer, govt regulation generating: formulate the problem, determine sources of info and design a research process, choose the appropriate data collection method, collect the data, analyze and interpret the data disseminating: reproducible, accurate, collaborative responding: 4 ps data: primary, secondary
Statement of cash flows
operating activities: producing and selling the entity's products/services investing activities: buying (or selling) fixed assets (e.g., a building or equipment) financing activities: obtaining (or repaying) debt and equity financing summary of the money flowing into and out of a firm during a period of time
return
opportunity for profit
• For promotion mix: advertising, personal selling, promotions, public relations
promotion mix—the means by which you communicate with customers—may include advertising, personal selling, sales promotion, and publicity. These are all tools for telling people about your product and persuading potential customers to buy it. advertising: paid, non-personal communication designed to create an awareness of a product or company advertising media: The choice of advertisingmedia depends on your product, target audience, and budget. personal selling: one-on-one communication with customers or potential customers sales promotion: It's likely that at some point, you have purchased an item with a coupon or because it was advertised as a buy-one-get-one special. If so, you have responded to a sales promotion—one of the many ways that sellers provide incentives for customers to buy. Sales promotion activities include not only those mentioned above but also other forms of discounting, sampling, trade shows, in-store displays, and even sweepstakes. publicity: getting your company or your product mentioned or pictured in a newspaper or on TV—can often generate more customer interest than a costly ad. public relations: the professional maintenance of a favorable public image by a company or other organization or a famous person.
Managerial Accounting
provides financial information that managers inside the organization can use to evaluate and make decisions about current and future operations
Income statement
revenues, expenses, and net profit or net loss firm's profit (loss) over a period of time
• Marketing concept
satisfying customer needs while meeting organizational goals 1.Find out what customers or potential customers need. 2.Develop products to meet those needs. 3.Engage the entire organization in efforts to satisfy customers. and achieve organizational goals like profitability and growth
• Social media and marketing
social media marketing has exploded. You already know what social media is—Facebook, Twitter, LinkedIn, TikTok, YouTube, and any number of other online sites that allow you to network, share your opinions, ideas, photos, etc. Social media marketing is the practice of including social media as part of a company's marketing program create brand awareness; connect with customers and potential customers by engaging them in two-way communication; build brand loyalty by providing opportunities for a targeted audience to participate in company-sponsored activities, such as contests; offer and publicize incentives, such as special discounts or coupons; gather feedback and ideas on how to improve products and marketing initiatives; allow customers to interact with each other and spread the word about a company's products or marketing initiatives; and take advantage of low-cost marketing opportunities by being active on free social sites, such as Facebook. can be time consuming
financial management
the art and science of managing a firm's money so that it can meet its goals
Liquidity and managing cash flows
used to determine how financially stable your business is by calculating the amount of cash or other liquid assets you have available to cover upcoming business expenses try to shorten inflow and outflow The three key strategies are to collect money owed to the firm (accounts receivable) as quickly as possible, to pay money owed to others (accounts payable) as late as possible without damaging the firm's credit reputation, and to minimize the funds tied up in inventory.
Liquidity Ratios
• How quickly a company can pay off it's debts by turning assets into cash; of special interest to creditors • High: company has excess cash that could be put to use elsewhere • Low: company may have difficulty meeting short-term obligations Current: How quickly can a company pay off it's debts by turning assets into cash? Quick: same as current ratio, but excludes inventory Net Working Capital: not a ratio, but a measure of overall liquidity
Profitability Ratios
• How well a company uses its resources to generate profit • Compare companies in same industry (profit margins vary by industry) NPM (return on sales): how much is left after all expenses have been deducted? ROE: what is the return owners are receiving based on their investment? EPS: amount earned by EACH share of stock (this is NOT the amount each investor receives - it's not a dividend)
