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Essay / Research Paper Abstract
A 4 page paper discussing measures that an investor should want to assess when considering the stock of a company. Here, an individual is considering investing in the stock of Prime Properties, Inc., a property management and real estate firm. Measures the investor should want to examine include working capital and ratios of profitability, liquidity and leverage. The balance sheet is not available, but revenues and expenses have declined over 3 years as interest expense has risen. The investor would need to assess the balance sheet to find the ratios discussed in the paper, nearly all of which require the use of current assets, current liabilities, total assets and stockholders' equity to determine. Bibliography lists 2 sources.
Page Count:
4 pages (~225 words per page)
File: CC6_KSstkInvMeas.rtf
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Unformatted sample text from the term paper:
considering investing in the stock of Prime Properties, Inc., a property management and real estate firm. Measures the investor should want to examine include working capital and ratios of
profitability, liquidity and leverage. Profitability and Management Effectiveness There are four profitability ratios, each of which provides specific information for the investor and
for the companys management. The profitability ratios are operating profit margin, net profit margin, return on assets and return on equity. Operating and net profit margins provide management
with measures of how well the company is doing what it intends to do. Investors may be interested in these ratios, but they likely have greater interest in ROE,
which provides an indication of how much the company is generating in earnings per invested dollar. This is of direct interest to shareholders, while ROA is of greater use
to the companys senior management. Liquidity Measures Another four ratios are designed to indicate the organizations ability to meet its short-term obligations such
as interest payments and other short-term debts, which typically are paid for with current assets. These ratios are the current ratio, quick ratio, working capital and leverage.
The current ratio results from dividing current assets by current liabilities. A current ratio approaching 1 is desirable. Quick Ratio
Also known as the acid test, the quick ratio is similar to the current ratio. The difference between the two is that the quick
ratio excludes inventory, making it a more conservative test than the current ratio. The quick ratio is a better measure in property management, where inventory cannot be quickly converted
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