The quick ratio is calculated
as (cash + marketable securities + receivables) divided by current
liabilities. This ratio is an indicator of the ability of the
company to meet current debts. The rule of thumb is that a quick
ratio under 1, or 100%, requires further scrutiny. The quick
ratio is similar to the current ratio, except that the current ratio
includes all current assets. Inventory and prepaid expenses are
excluded from the quick ratio calculation. Comparing the current
ratio to the quick ratio gives an indication of the impact of
inventory on the company's working capital.
An investment vehicle which allows
people to invest in a portfolio of real estate
holdings by purchasing units of the trust.
This gives the holders more diversity and
liquidity than investing directly in real
estate. REITs pass their cashflow through to unitholders,
so that the income is taxed not in the REIT, but in the hands of the
When dividends are declared by a
corporation, the dividend announcement includes
the amount of the dividend and the record
date. The dividend is paid to shareholders
who hold the stock on the record date.
Because it takes 3 days for trades in shares of
corporations to be settled, a person must buy the
stock at least 3 days prior to the record date (at
least the day prior to the ex-dividend
date) in order to be entitled to the
dividend. See also trade
date and settlement
The net income, or net profit,
generated by a company each year is transferred to Retained Earnings,
which is a part of Shareholders' Equity on the balance
sheet. Retained Earnings
are the accumulated profits
of the company, and show as a positive amount on the balance
sheet. If the company has accumulated losses instead of profits,
this is called Accumulated Deficit, and shows up as a negative amount
on the balance sheet.
Return on assets (ROA)
The return on assets is a
measure of the company's profitability and efficiency. It is
calculated by dividing the annual operating income (income before
interest and taxes) by the average total assets. The average of total assets
can be determined by
adding the year's beginning and ending balances of total assets, and dividing by two.
Return on equity (ROE)
This ratio reflects the profitability of the
investment to the common shareholders. It is calculated by
dividing the annual net income less any preferred stock dividend
requirements by the average common shareholders' equity during the
year. The average common equity is usually determined by adding
the year's beginning and ending balances, and dividing by two.
The amount of sales, rental,
interest and other income earned by a business. The revenue of a
business is reported on the income statement.
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