What Does a Current Ratio of 1.5 Mean? A current ratio of 1.5 would indicate that the company has $1.50 of current assets for every $1.00 of current liabilities. For example, suppose a company’s current assets consist of $50,000 in cash plus $100,000 in accounts receivable.
What does a total asset turnover ratio of 1.5 times represent quizlet? Indicates to what extent the firm is using debt and the prudence with which it is being managed. What does a return on assets of 12.5% mean? What does a total asset turnover ratio of 1.5 times represent? The company generated $1.50 in sales for every $1 in total assets.
Similarly, How do you calculate 1.5 power? The number, 1.5 is the same as 3/2 (three halves). A fractional power is a root; i.e. x^(1/2) or x^(0.5) is, by definition, the square root of x. 4^1.5 is 4^(3/2), the square root of four cubed.
Is a current ratio of 1.7 good?
In general, the higher the ratio, the greater a company’s liquidity. Typically, current ratio lies between 1 and 1.5, although it varies between industries. Lenders may require at least 1.5.
What is a good asset to liabilities ratio?
What is a Good Debt to Asset Ratio? As a general rule, most investors look for a debt ratio of 0.3 to 0.6, which is the ratio of total liabilities to total assets. The debt to asset ratio is another good way of analyzing the debt financing of a company, and generally, the lower, the better.
What does a fixed asset turnover ratio of 4 times represent?
Your fixed asset turnover ratio equals 4, or $800,000 divided by $200,000. This means you generated $4 of sales for every $1 invested in fixed assets.
What does a times interest earned ratio of 10 times indicate? Example. Thus, Joe’s Excellent Computer Repair has a times interest earned ratio of 10, which means that the company’s income is 10 times greater than its annual interest expense, and the company can afford the interest expense on this new loan.
What does a receivables turnover of 7 times? What does a receivable turnover of 7 times represent? The company issued and collected trade credit, all the level of its accounts receivable balance, 7 times during the year.
What if the exponent is a decimal?
When taking the power of a decimal, first count the number of decimal places in the base number, as when multiplying decimals (see Decimal Multiplication. Next, multiply that number by the exponent. This will be the total number of decimal places in the answer. … There is 1 decimal place and the exponent is 4.
What is the easiest way to calculate power?
What will happen if the exponent is negative?
A positive exponent tells us how many times to multiply a base number, and a negative exponent tells us how many times to divide a base number. We can rewrite negative exponents like x⁻ⁿ as 1 / xⁿ. For example, 2⁻⁴ = 1 / (2⁴) = 1/16.
What does a current ratio of 1.2 mean? A good current ratio is between 1.2 to 2, which means that the business has 2 times more current assets than liabilities to covers its debts. A current ratio below 1 means that the company doesn’t have enough liquid assets to cover its short-term liabilities.
What does it mean if the current ratio is above 2?
A current ratio greater than 2.0 may indicate that a company isn’t investing its short-term assets efficiently.
What does it mean if the current ratio is more than 2?
The higher the ratio, the more liquid the company is. … If the current ratio is too high (much more than 2), then the company may not be using its current assets or its short-term financing facilities efficiently. This may also indicate problems in working capital management.
Is it better to have a higher or lower debt to asset ratio? In general, many investors look for a company to have a debt ratio between 0.3 and 0.6. From a pure risk perspective, debt ratios of 0.4 or lower are considered better, while a debt ratio of 0.6 or higher makes it more difficult to borrow money.
Should Times Interest Earned ratio be high or low?
A higher times interest earned ratio is favorable because it means that the company presents less of a risk to investors and creditors in terms of solvency. From an investor or creditor’s perspective, an organization that has a times interest earned ratio greater than 2.5 is considered an acceptable risk.
What does a debt-to-equity ratio of 1.5 mean?
For example, a debt to equity ratio of 1.5 means a company uses $1.50 in debt for every $1 of equity i.e. debt level is 150% of equity. A ratio of 1 means that investors and creditors equally contribute to the assets of the business.
What does a low fixed asset turnover ratio mean? A low fixed asset turnover ratio indicates that a business is over-invested in fixed assets. A low ratio may also indicate that a business needs to issue new products to revive its sales. Alternatively, it may have made a large investment in fixed assets, with a time delay before the new assets start to generate sales.
Is a high fixed asset turnover good?
A higher turnover ratio is indicative of greater efficiency in managing fixed-asset investments, but there is not an exact number or range that dictates whether a company has been efficient at generating revenue from such investments.
Can high asset turnover be bad? Interpretation of the Asset Turnover Ratio
A higher ratio is favorable, as it indicates a more efficient use of assets. Conversely, a lower ratio indicates the company is not using its assets as efficiently. This might be due to excess production capacity, poor collection methods, or poor inventory management.
How do you interpret times interest earned?
A higher times interest earned ratio is favorable because it means that the company presents less of a risk to investors and creditors in terms of solvency. From an investor or creditor’s perspective, an organization that has a times interest earned ratio greater than 2.5 is considered an acceptable risk.
Why would times interest earned decrease? A lower times interest earned ratio means fewer earnings are available to meet interest payments. Failing to meet these obligations could force a company into bankruptcy. It is used by both lenders and borrowers in determining a company’s debt capacity.
What does the times interest earned ratio tell us?
The times interest earned (TIE) ratio is a measure of a company’s ability to meet its debt obligations based on its current income. The formula for a company’s TIE number is earnings before interest and taxes (EBIT) divided by the total interest payable on bonds and other debt.