Current Ratio And Total Debt To Asset Ratio
Working capital ratio allows a company to manage day to day operations. This is also known as liquid assets. So by dividing the current assets by the current liabilities, this will give the working capital ratio. The 2012 current assets of the UOCMC were $74,348 and the current liabilities were $117,678. By dividing the current assets by the current liabilities, the working capital ratio of 0.631 was produced. A stable working capital ratio is between 1.2 and 2.0. The working capital ratio of less than one identifies a business that is not able to handle current liabilities and might be in trouble.
The cash ratio indicates a company’s liquidity by measuring the amount of the company’s cash, cash equivalents and invested funds over their liabilities (Loth, nd.). To continue with the figures from the UOCMC in 2012, their cash and cash equivalents of $74,348 plus invested funds of $27,033 divided by their current liabilities of $190,257 equaled a cash ratio of 0.53.
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The operating expense ratio measures the financial efficiency of a company in how it is able to generate income (Kantrovich, 2012). The formula for this ratio is the total operating expense not including interest minus depreciation divided by gross income. In 2012 the total operating expense of $1,170,723 minus the depreciation of $67,522 divided by gross income $1,289,885 equaled 0.85. The depreciation expense ratio indicates the amount on revenue required to sustain the capital that is used by the company. A lower the depreciation-expense ratio displays a better condition of the company. This ratio is calculated by dividing the depreciation of $67,522 by the gross income of $1,289,885 to obtain the depreciation-expense ratio of