Cash Flows, Depreciation, Income Statement, Retained Earning Statement, Internal Control Procedures - Case Study Example

It is calculated by subtracting the current asset from the current liabilities of the company. The negative figure means that the liabilities are more than the assets. Earnings per share (EPS) are considered one of the most important financial ratios from the investor’s point of view. The ratio highlights the average earnings from the shares transacted and is calculated by dividing the profit attributable to the common shareholders and multiplying them by the weighted average number of shares outstanding during the period.

Earnings per share of 0.57 can be interpreted as if the investor invests $1 in the company, he will earn $0.57 on his investment. The debt ratio, which is calculated by comparing the total liabilities to total assets, is a primary tool in determining the influence the company is under as a result of obtaining finances from sources other than equity. A lower ratio represents that the company is utilizing its equity to finance its operations and thus curtailing the financial risk. A ratio of 0.

63 represents that 63% of the company's assets are financed by debt. The free cash flow method is a measure of the financial performance of the company which is calculated as free cash flows minus the capital expenditure. From pure financial management’s perspective, free cash flow can be defined as the cash which the company can generate by setting aside the money required to maintain or expand its current asset.