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.
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.
