Working Capital - higher numbers are better

Current ratio - higher numbers are better

Inventory turnover - higher numbers are better

Days in inventory - fewer days are better Accounts receivable turnover - higher numbers are better Accounts receivable average collection period - fewer days are better

Debt-to-assets ratio - higher numbers are riskier; lower numbers are safer

Times interest earned - higher numbers are better

Free cash flow - higher numbers are better

Earnings per share - higher numbers are better

Price-earnings ratio - higher ratios means the stock is more expensive; lower ratios means the stock is cheaper

Gross profit rate - higher numbers are better

Profit margin - higher numbers are better

Return on assets - higher numbers are better

Asset turnover - higher numbers are better

Payout ratio - higher numbers mean the stockholders are getting more of the earnings as dividends Return on common stockholders' equity - higher numbers are better

1. Choose three ratios from above you would use to select stocks.
2. Explain why you choose each ratio, including what financial characteristic it measures and how you would interpret the ratio results.
3. Post your selection and explanation in the discussion board for your classmates to read
4. Read your classmates postings and select two for response.
5. In your response to peers, suggest an additional fourth ratio (one they did not select) they could use. Explain how using it would enhance their stock selection and how they should interpret the results of this additional ratio.

Answer rating: 100% (QA)

Selected Ratios 1 Return on Assets ROA Financial Characteristic Measures the efficiency of utilizing ... View the full answer