BUS 4404 – Principle of Finance 2

University of the People

Weaver Corporation Financial Statements

Current Ratio (Walther, 2012)

The Current Ratio measures the ability of a company to pay off its short-term liabilities with its

short-term assets.

Total Current Assets

Current Ratio=
Total Current Liabilities

940,000
Current Ratio= =4.7
200,000

Quick Ratio (Walther, 2012)

The Quick Ratio is an indicator of a company's short-term liquidity position and measures a

company's ability to meet its short-term obligations with its most liquid assets.

Cash+ Account Receivable

Quick Ratio=
Total current liabilities

500,000+350,000
Quick Ratio= =4.25
200,000

Debt-to-Total Assets Ratio (Walther, 2012)

This ratio measures the percentage of total assets financed by creditors. It's calculated by

dividing total liabilities by total assets.

Total Liabilities
Debt −¿−Total Assets Ratio=
Total Assets

1,000,000
Debt −¿−total assets ratio= =0.4211 ( 42.11% )
2,375,000

Earnings Per Share (EPS)

EPS is calculated by dividing the net income by the number of outstanding shares. Assuming the

common stock represents the total shares outstanding and given the par value, we can estimate

the number of shares (U.S. Securities and Exchange Commission, n.d.).

Net income
EPS=
Number of shares outstanding

Common Stock Value 100,000

Number of shares= = =200,000 shares
Per Value Per share 0.5

160,000
EPS= =0.80 per share
200,000

Market Capitalization (Walther, 2012)

Market capitalization is calculated by multiplying the current stock price by the total number of

shares outstanding.

Market Capitalization=Stock Price× Number of Shares

Market Capitalization=16 ×200,000=3,200,000

These ratios provide insights into Weaver Corporation's financial health and performance in

2013. The Current and Quick Ratios indicate a strong liquidity position, the Debt-to-Total Assets

Ratio shows a moderate level of leverage, and the EPS and Market Capitalization offer a

perspective on the company’s profitability and market value respectively.

Reference

U.S. Securities and Exchange Commission. (n.d.). Beginner's Guide to Financial Statements.

https://www.sec.gov/reportspubs/investor-publications/investorpubsbegfinstmtguide

Walther, L. M. (2012). Chapter 16: Principles of Accounting. Logan, UT: Utah State University.

Available at

http://www.principlesofaccounting.com/chapter-16/