1.

Debt Ratio = Total Liabilities/Total Assets

The banker discovers that Dave has total assets of 100,000 and total liabilities of 25,000. Dave's debt
ratio would be calculated like this:

25,000/100,000 = .25

2. Debt to Equity Ratio = Total Liabilities/Total Equity

Assume a company has 100,000 of bank lines of credit and a 500,000 mortgage on its property. The
shareholders of the company have invested 1.2 million.

100,000+500,000/1,200,000 = .5

3. Dividend Yield Ratio = Annual Dividends per share/Market Value per share of Ordinary Shares

Stacy's Bakery is an upscale bakery that sells cupcakes and baked goods in Beverly Hills. Stacy's is listed
on a smaller stock exchange and the current market price per share is 15. As of last year, Stacy paid
15,000 in dividends with 1,000 shares outstanding.

15/15 = 1

4. Inventory Turnover Ratio = Cost of Goods Sold/Average Merchandise Inventory

Donny's Furniture Company sells industrial furniture for office buildings. During the current year, Donny
reported cost of goods sold on its income statement of 1,000,000. Donny's beginning inventory was
3,000,000 and its ending inventory was 4,000,000.

1,000,000/(3,000,000+4,000,000)/2

5. Asset Turnover Ratio = Net Sales/Average Total Assets

Sally's Tech Company is a tech start up company that manufactures a new tablet computer. Sally is
currently looking for new investors and has a meeting with an angel investor. The investor wants to know
how well Sally uses her assets to produce sales, so he asks for her financial statements. Beginning Assets:
50,000 Ending Assets: 100,000 Net Sales: 25,000

25,000/(50,000+100,000)/2
1. Accounts Receivable Turnover Ratio = Net Credit Sales/Average Accounts Receivable

Bill's Ski Shop is a retail store that sells outdoor skiing equipment. Bill offers accounts to all of his main
customers. At the end of the year, Bill's balance sheet shows 20,000 in accounts receivable, 75,000 of
gross credit sales, and 25,000 of returns. Last year's balance sheet showed 10,000 of accounts
receivable.

50,000/15,000 = 3.33

2. Current Ratio = Current Assets/Current Liabilities

Charlie's Skate Shop sells ice-skating equipment to local hockey teams. Charlie is applying for loans to
help fund his dream of building an indoor skate rink. Charlie's bank asks for his balance sheet so they can
analysis his current debt levels. According to Charlie's balance sheet he reported 100,000 of current
liabilities and only 25,000 of current assets.

25,000/100,000 = .25

3. Quick Ratio = Total Current Assets-Inventory-Prepaid Expenses/Current Liabilities

Cash: 10,000 Accounts Receivable: 5,000 Inventory: 5,000 Stock Investments: 1,000 Prepaid Taxes: 500
Current Liabilities: 15,000

10,000+5,000+1,000/15,000 = 1.07

4. Debt Ratio = Total Liabilities/Total Assets

The banker discovers that Dave has total assets of 700,000 and total liabilities of 14,000. Dave's debt
ratio would be calculated like this:

14,000/700,000 = .02

5. Debt to Equity Ratio = Total Liabilities/Total Equity

Assume a company has 300,000 of bank lines of credit and . The shareholders of the company have
invested 1.5 million.

300,000+/1,500,000 = .2
WHAT IT IS:

Dilution is a reduction in proportional ownership caused when a

company issues additional shares.

HOW IT WORKS (EXAMPLE):

Let's assume you own 100,000 shares of XYZ Company. The company has 1,000,000 shares
outstanding, meaning that you own 10% of the company. Shares of XYZ Company are
trading at $5, so the company's current market value is $5,000,000 and
your investment is worth $500,000.

XYZ Company wants to build a new plant, so it issues 500,000 shares. Your 100,000 shares
are now only 6.67% of the company (100,000/1,500,000 = 6.67%).

In the end, the dilution may be worth it if the plant makes XYZ Company more profitable.
If however, the company issued those shares as part of an overly generous stock
option program or to raise funds for projects that fail to contribute profit, the dilution
may cause permanent damage to the value of your holding.

WHY IT MATTERS:

Dilution is the act of dividing the proverbial pie into ever smaller pieces, and it is usually
not well received by investors. Several events can cause dilution, particularly secondary
offerings, the conversion of convertible securities, option exercises, and warrant
exercises. On occasion, companies purchase their own shares on the open market to
combat dilution. It is important to note stock splits do not usually create dilution, because
in a stock split the investor receives additional shares to preserve his or her percentage
ownership and investment value.

Although dilution most noticeably affects ownership percentages, earnings per share
calculations also consider the effects of dilution. This is why most public companies report
both basic and diluted earnings, whereby potentially dilutive securities are treated as if
they were already converted to outstanding shares. This effectively increases the number
of shares over which the company's earnings would be spread if all potentially dilutive
securities were exercised.
In some companies, shareholders can protect themselves from dilution if they have the
right to purchase shares in any of the company's future stock issuances. These anti-
dilution provisions, also called subscription rights or preemptive rights, usually appear in a
corporation's charter.

WHAT IT IS:

Dilution is a reduction in proportional ownership caused when a

company issues additional shares.

HOW IT WORKS (EXAMPLE):

Let's assume you own 100,000 shares of XYZ Company. The company has 1,000,000 shares
outstanding, meaning that you own 10% of the company. Shares of XYZ Company are
trading at $5, so the company's current market value is $5,000,000 and
your investment is worth $500,000.

XYZ Company wants to build a new plant, so it issues 500,000 shares. Your 100,000 shares
are now only 6.67% of the company (100,000/1,500,000 = 6.67%).

In the end, the dilution may be worth it if the plant makes XYZ Company more profitable.
If however, the company issued those shares as part of an overly generous stock
option program or to raise funds for projects that fail to contribute profit, the dilution
may cause permanent damage to the value of your holding.

WHY IT MATTERS:

Dilution is the act of dividing the proverbial pie into ever smaller pieces, and it is usually
not well received by investors. Several events can cause dilution, particularly secondary
offerings, the conversion of convertible securities, option exercises, and warrant
exercises. On occasion, companies purchase their own shares on the open market to
combat dilution. It is important to note stock splits do not usually create dilution, because
in a stock split the investor receives additional shares to preserve his or her percentage
ownership and investment value.
Although dilution most noticeably affects ownership percentages, earnings per share
calculations also consider the effects of dilution. This is why most public companies report
both basic and diluted earnings, whereby potentially dilutive securities are treated as if
they were already converted to outstanding shares. This effectively increases the number
of shares over which the company's earnings would be spread if all potentially dilutive
securities were exercised.

In some companies, shareholders can protect themselves from dilution if they have the
right to purchase shares in any of the company's future stock issuances. These anti-
dilution provisions, also called subscription rights or preemptive rights, usually appear in a
corporation's charter.