Suppose that I have a company and I have given these data below for the first 3
ID: 2459530 • Letter: S
Question
Suppose that I have a company and I have given these data below for the first 3 years. I need a small analysis for these 2 terms. 2-7 sentences for each one. I don't want forumals, I need only analysis on what they do and what would happen given the data below. like for example what happen when gross profit ratio is high or low and so on so forth "PLEASE IN YOUR OWN WORDS, DONT COPY FROM THE INTERNET".
1- Debit to equity Ratio = [year one is 25.44%] [year two: 29%] and [year three is 105.43%]
2- Book Vaule per share = [year one is 1.322] [year two is 1.323] and [year three is 1.35]
"PLEASE IN YOUR OWN WORDS, DONT COPY FROM THE INTERNET
Explanation / Answer
1. Debit to equity Ratio = [year one is 25.44%] [year two: 29%] and [year three is 105.43%]
It states that the debt to Equity ratio is increasing year byyear.That means the percentage of debt is increasing than the equity.
Debt to Equity ratio = Debt/ Equity
The Debt is an external source of financing which makes the company more levered which is not as beneficial for the company. The company should use more the internal financing. The increase in debt increases the interest and therefore increasing the liability of the company.
2. Book Vaule per share = [year one is 1.322] [year two is 1.323] and [year three is 1.35]
The Book Value of the share is also increasing year by year throughout the period of 3 years. It depicts the true value of the business. Increase in book value per share bring more investors and the trusts.
Book Value is the shareholders equity therefore more shareholders would like to be the part of the company with the increased book value.