Analyzing Investment Activities

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Analyzing Investment Activities Week 4 – Part 2 Lecture date: 11/10/2016 FINA321 – Fall 2016 Abdullah Al Shukaili

Guest Speaker On Thursday; October 13th Topic: The process of Auditing Please prepare for this discussion

Intangible Asset Intangible assets are rights, privileges, and benefits of ownership or control

Liquidity ratio Ratios: are financial indicators that distill relevant information about business entity, & identify trends that may important to investors, lenders, and other interested parties. Important to analyze financial statements in relationship to each other and over time Liquidity ratios: are measures of a firm’s short-term ability to pay maturing obligations.

Liquidity ratios Working Capital = Current assets – Current liabilities Current ratio = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑒𝑠 Quick ratio = 𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒂𝒔𝒔𝒆𝒕 −𝒊𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒆𝒔

Current ratio Current ratio provides a measure of the firm’s ability to pay current liabilities You can analyze by how much the company has ( current ratio) to pay for every $ 1 The minimum accepted current ratio is 2:1

Quick ratio Includes all current asset except inventory, which is least liquid and may not be ready converted into cash The minimum accepted quick ratio is 1