Company Coverage Ratios

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The purpose of these ratios is to measure if the company able to meet its financial obligation as they come due
Coverage ratios include debt service coverage ratio, Cash Debt Coverage Ratio, and the asset coverage ratio.
• Asset Coverage Ratio
This ratio looks to the balance sheet assets in comparison to debt. The ratio is a company's total assets minus short-term liabilities divided by its total debt, a ratio of two or above means that the company has sufficient assets to manage its debt.
Asset Coverage Ratio
= (Total assets - short term liabilities)
AVON= .5 ULTA= 2.01 REVLON= .63
• Debt-Service Coverage Ratio
The debt service coverage ratio measures how well a company is able to pay its entire debt. Debt service includes principal and
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Market Prospect Ratio, The purpose of Market prospect ratios is to show the investors what they should expect to receive from their investment. It could be future dividends, earnings, or an appreciated stock value. These ratios are helpful for investors to evaluate how much the stock prices will be in the future based on current earnings and measurements.
There are many market prospect ratios such as Earning per share Ratio, Price earnings ratio, and dividend payout ratio.
• P/E ratio = (Net income – Preferred dividends) / common stock outstanding
AVON= -.02% ULTA = 102% REVLON= -.04%
• Dividend Payout Ratio:
This ratio represents the percentage of money that distributed to the shareholders during the year comparing to the amount of money the company decided to keep for
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Avon Products Company has to adopt a new financial strategy, to reduce the expenses and increase the profit, it is struggling and it is the time to take brave decisions such as selling some assets those can’t generate profit, decrease the market in the slowing countries and expand it in the active countries.
Avon Products Company has excess of inventory and long inventory cycle, the inventory cycle needs to be managed and reduced also, the APP needs to be expanded to help the company collecting the AR for credit sales before starting paying for the purchase of the

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