What Does Private Equity Mean? Equity capital that is not quoted on a public exchange.

Private equity consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity.Many private equity firms conduct what are known as leveraged buyouts (LBOs), where large amounts of debt are issued to fund a large purchase. Private equity firms will then try to improve the financial results and prospects of the company in the hope of reselling the company to another firm or cashing out via an IPO. private equity firms invest in both privately and publicly held companies. Interest Coverage Ratio The interest coverage ratio is used to determine how easily a company can pay interest expenses on outstanding debt. The ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) by the company's interest expenses for the same period. The lower the ratio, the more the company is burdened by debt expense. When a company's interest coverage ratio is only 1.5 or lower, its ability to meet interest expenses may be questionable. Formula:

Current Ratio :The current ratio (or liquidity ratio) is a measure of financial strength. The number of times current assets exceed current liabilities is a valuable expression of a business' solvency. Here is the formula to compute the current ratio: Total Current Assets Current Ratio = Total Current Liabilities

A rule-of-thumb puts a strong current ratio at two Quick Ratio :The quick ratio is also called the "acid test" ratio. It is a measure of a company's liquidity. The quick ratio looks only at a company's most liquid assets and divides them by current liabilities. Here is the formula for the quick ratio: Current Assets - Inventory Quick Ratio = Total Current Liabilities

The assets considered to be "quick" assets are cash, stocks and bonds, and accounts receivable (all of the current assets on the balance sheet except inventory). The quick

ratio is an acid test of whether or not a business can meet its obligations if adverse conditions occur. Generally, quick ratios between .50 and 1 are considered satisfactory as long as the collection of receivables is not expected to slow. Working Capital :Working capital should always be a positive number. It is used by lenders to evaluate a company's ability to weather hard times. Often, loan agreements specify a level of working capital that the borrower must maintain. The current ratio, quick ratio and working capital are all measures of a company's liquidity. In general, the higher these ratios are, the better for the business and the higher degree of liquidity. Working Capital = Total Current Assets - Total Current Liabilities Debt/Worth Ratio :The debt/worth ratio (or leverage ratio) is an indicator of a business' solvency. It is a measure of how dependent a company is on debt financing (or borrowings) as compared to owner's equity. It shows how much of a business is owned and how much is owed. The debt/worth ratio is computed as follows: Total Liabilities Debt/Worth Ratio = Net Worth The P/E ratio (price-to-earnings ratio) of a stock (also called its "P/E", or simply "multiple") is a measure of the price paid for ashare relative to the annual net income or profit earned by the firm per share The reciprocal of the P/E ratio is known as the earnings yield.[3] The earnings yield is an estimate of expected return to be earned from holding the stock

"ROE" means Return on equity. The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. ROE is expressed as a percentage and calculated as: Return on Equity = Net Income/Shareholder's Equity book value book value means the value of any asset showen in financial statements A contingent liability is a potential liability it depends on a future event occurring or not occurring. If a company is sued by a former employee for Rs500,000 for age discrimination,

the company has a contingent liability. If the company is found guilty, it will have a liability. However, if the company is not found guilty, the company will not have an actual liability.