In at least three well composed paragraphs, please explain what each computed value means (not in numbers, but in words) and how each calculated value would be used to evaluate a business.
OWN WORDS AND REFERENCES. approx 250 words.
1) Current Ratio refer to the current assets versus liability. In our case, the assets adds upto 940,000 while the liability stands at 200,000 the ratio is 940,000/200,000 = 4.7 (Investopedia, 2018).
2) Quick Ratio (940,000 –90,000)/200,000 = 850,000/200,000 = 4.25:1
Formula: Liquid Assets/ Liabilities (Investopedia, 2018).
3) Debt-to-Total Assets Ratio
A) 200,000 + 800,000 = 1,000,000
B) 1,000,000/2,375,000 = 0.42 = 42%
Ratio Debt-to-Total Assets Ratio Formula: Total Liabilities/Total Assets
4) Earnings per share is given by the net income versus the weighted average
Earnings per share = 160,000/40,000 = 4
5) Market capitalization is given by Cost per share * Number of shares
Market capitalization = 0.5 * 100,000 = $ 50,000.
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