Part II: Chapter 6 - Investment Recommendations and Strategies; Section 10

Current Ratio

Current Assets / Current Liabilities Standard minimum is 2:1. Most accurately describes liquidity, not profitability, coverage, or debt.

Quick Ratio (Acid Test Ratio)

Current Assets Less Inventory / Current Liabilities Standard minimum is 1:1. Most stringent measure of corporate liquidity.

10-Q

A comprehensive report of a company's performance that must be submitted quarterly by all public companies to the SEC. In the 10-Q, firms are required to disclose relevant information regarding their financial position.

10-K

A comprehensive summary report of a company's performance that must be submitted annually to the SEC. Typically, the 10-K contains much more detail than the annual shareholder's report.

Prospectus

A disclosure document filed by a corporation with the SEC. It provides the details about an investment offering for sale to the public.

8-K

A report of unscheduled material events or corporate changes at a company that could be of importance to the shareholders or the SEC (acquisitions, bankruptcy, change in the fiscal year, etc.).

Debt to Equity

Total Debt / Net Worth Net worth is the same as Shareholder's Equity. Is a measure of financial leverage and would be used i the analysis of the capital structure of a company to determine if it is conservative or speculative.

Liquidity Ratios

Used to determine the ability of a corporation to meet short-term obligations. These ratios will always take current assets and current liabilities into account. 1. Current Ratio 2. Quick Ratio (Acid Test Ratio)

Financial Ratios

Useful indicators of a firm's performance and financial situation. Most ratios can be calculated from information provided by the financial statements. Financial ratios can be used to analyze trends and to compare the firm's financials to those of other firms.

Public companies must provide their shareholders with _____ which chronicles the company's activities over the past year but most importantly contains the company's financial statements.

an annual report

Corporate SEC Filings

1. 10-Q 2. 10-K 3. 8-K