C,Y, DISCUSSION PLS REPLY
The working capital ratio is calculated simply by dividing total current assets by total current liabilities. It is a measure of liquidity, meaning the business's ability to meet its payment obligations as they fall due.
Working capital ratio= Current assets / Current liabilities
If this ratio is around 1.2 to 1.8 – this is generally said to be a balanced ratio, and it is assumed that the company is in a healthy state to pay its liabilities.
If it is less than 1- it is a negative working capital, which generally means that the company cannot pay its liabilities. A consistently negative working capital may also lead to bankruptcy.
Example: Sears holding stock fell by 9,8 % due to continuing losses and poor quarterly results. Sears balance doesn't look too good either. Especially if you check the working capital situation of Sears holding and calculate the working capital ratio, you will note that this ratio has been decreasing continuously for the past ten years or so. This ratio below 1.0 x is not good. Making cash flow more predictable in order to fuel your operating cycle for growth can seem easier said than done. These working capital improvements techniques can help: shorten operating cycles, avoid finances fixed assets with working capital, perform credit checks on new customers, utilize trade credit insurance, cut unnecessary expenses, reduce bad debt, and fund additional bank finances.
I must say when it comes to finances in my personal life I haven't always made the best decisions. So has I did research on many of the different types of ratios I now understand the importance of ratio and finances. This course is also showing me ways to better handle my finances and situations that may occur.
J.W. DISCUSSION PLS REPLY
As a healthcare manager, calculating debts to asset ratio is an important tool to determine a company's financial position. In finance, a ratio tells you how much liability is financed by assets. I can make informed decisions about the financial health of the company using the debt-to-asset ratio calculation. When the ratio is high, the manager may need to increase equity financing to reduce debt.
Leadership teams in healthcare could use the financial ratio to determine if they need to reduce debt or if they are in a position to pursue growth opportunities. As an example, if the financial ratio is high, the team might need to take out a loan to pay off existing debt. Therefore, a low financial ratio may allow the team to invest in capital projects.
It would be a good idea for leadership to take a closer look at their expenses and look for opportunities to cut back. In addition, they should explore ways to increase revenue, such as by introducing new products, services, or investing in marketing.
My goal would be to have a higher asset ratio than debt ratio, using the Debt to Asset ratio. In my role as a healthcare administrator, I may be able to reduce expenses by reducing travel, office supplies, and technology costs.
