Key Business Ratios v 2.0 Course Transcript Presented by: TeachUcomp, Inc.

Key Business Ratios v 2.0 Course Transcript Presented by: TeachUcomp, Inc. Course Introduction Welcome to Key Business Ratios, a presentation of TeachUcomp, Inc. This course examines key ratios used to analyze organizational performance. Specifically, we will discuss the ratios used to analyze business liquidity, profitability, asset management, valuation, and leverage. This course contains six chapters and twelve distinct learning objectives. By the end of this course, you should be able to do all of the following: Describe the various ways that business ratios are used by professionals to improve organizations; name the five categories of ratios used most frequently in business analysis; describe the application of liquidity ratios; list three key liquidity ratios; describe the ways that profitability ratios are used by investors and analysts; name five key profitability ratios; explain the usefulness of asset management ratios; name four key asset management ratios; describe how analysts use valuation ratios to evaluate trends; list four key valuation ratios; describe the main focus of leverage ratio analysis; and name two key leverage ratios. We recommend printing this course transcript and using it to follow along and take notes during the video lessons. We will also be referencing the review questions, which can be accessed and printed through the training interface. We strongly recommend that you complete the review questions independently. The evaluative feedback that is provided tells us why a question was right or wrong and further assists in the retention of the material. Once you have completed each of the video lessons and the review, you will be required to take a final exam. Please complete the final exam and submit it to us, using the instructions in the Submittal Form which can also be accessed in the training interface. Now, please select the next video lesson to continue with the rest of the course. Page 1 of 15

CHAPTER 1- BUSINESS RESULTS RATIOS 1.1- Chapter One Key Terms and Learning Objectives In this chapter, we ll introduce basic concepts related to calculating and interpreting business ratios. Let s begin by reviewing the learning objectives for Chapter One. By the end of this chapter, you should be able to describe various ways that key business ratios are used by professionals to evaluate and improve organizations. You should also be able to name the five categories of key business ratios used most frequently in business analysis. There are two key terms for Chapter One. They are: entry and financial statement. The first key term for this chapter is entry. Generally, as used in this course, an entry describes an item written or preserved in some type of list, ledger, diary, or reference book. More specifically, we will be referencing entries on the financial statements throughout this course. The second key term for Chapter One is financial statement. As used in this course, a financial statement describes a formal record kept to record the financial activities and position of a business (or other organizational entity). Financial statements display an organization s relevant financial information in a structured manner that is understandable to those outside of the organization. Financial statements, when analyzed, often provide a snapshot of organizational functioning and profitability. 1.2- Introduction to Business Ratios A business ratio is a mathematical calculation which compares two or more entries from an organization s financial statements. Business ratios are used to analyze many different aspects of an organization, including the organization s liquidity, ability to pay current obligations, and profitability. Business ratios are used internally, by organizational leaders, to improve operations and identify problems within an organization. Internally, ratios can be used to compare an organization s performance against its goals. The same ratios are used externally, by banks, investors, and others, to determine whether an organization is sound. Ratios can also be used to compare an organization to its peers. Business ratios, when properly applied and analyzed, can offer insight into almost every area of an organization. When ratios are studied over time, additional information related to the trends of the organization, and its industry, can be studied. In a broad sense, business ratio analysis is performed in three steps. The first step involves gathering all of the necessary financial data needed to perform ratio calculations. The second step is to perform the appropriate mathematical calculations in order to determine specific ratios for an organization. The third step is to analyze the resulting ratios. Page 2 of 15

Before beginning any financial analysis of an organization, it is important to clarify both the scope and purpose of the analysis. There are several key business ratios which offer insight into different aspects of a business, but they must be applied specifically and consistently, to obtain pertinent data. After completing a financial analysis of an organization, it is important to periodically review both financial statements and related business ratios, so that shifts in performance may be observed and tracked over time. As time passes and more financial data about an organization is available, statistical trends can offer even more insight into the organization s strengths, weaknesses, and long-term outlook. 1.3- How Financial Ratios Are Used Business ratio calculations are performed, and the resulting ratios are analyzed, by many people, for a variety of reasons. Ratio analysis is generally done to make comparisons which help to evaluate various aspects of organizational performance, as well as helping to identify potential problems. Whether it is undertaken for internal or external purposes, ratio analysis uses the same financial data to calculate ratios in the same way. Although there are a few financial ratios that are useful on their own, many ratios are only useful when compared against other ratios of the same type. This is because business ratios are used primarily to make comparisons. There are several different types of basic comparisons that can be made using ratios. For example, ratios are often used to compare a company to another company of the same size and type. Ratios are also used to compare the performance of the same organization during different periods of time. Ratios can be used to compare a company to averages within that company s industry. Ratios are even used to compare industries to each other. Although ratios look at information from the past, the analysis of ratios can provide predictive information. Internally, a business can use ratio analyses to compare the performance of the organization against its goals, or against past performance. Most internal ratio comparisons are used to measure organizational performance either over time, or against another similar business. Both of these types of comparisons can yield valuable trend information that can be used to improve the organization s performance. For example, a company could track its quick ratio results over time in order to spot inventory management trends, or compare a specific company ratio against the same ratio for a competing company. Externally, ratio analysis of a business is often conducted by outside entities that have some interest in the business. When an outside party analyzes the financial ratios of a business, it is usually as part of a decision-making process related to that business. For example, banks analyze the financial ratios of a business as part of deciding whether to make loans or extend credit lines. Investors examine financial ratios to analyze organizations before deciding to invest. Ratios are sometimes even studied by vendors and subcontractors that are deciding whether to enter into a contract with a business. It is important to understand that completing a financial ratio calculation will not usually offer much insight into an organization s performance. It is the analysis of ratios through comparisons which provides Page 3 of 15

the most usable information. This course will focus primarily on the calculations used to complete several key financial ratios used in business, but will not examine the in-depth process of analyzing ratio comparisons. 1.4- Categories of Key Business Ratios Although financial analysts have identified numerous categories of financial ratios, there are five categories of key business ratios that we will examine in this course. They are: Liquidity ratios, profitability ratios, asset management ratios, valuation ratios, and leverage ratios. Liquidity ratios are those ratios which measure an organization s ability to meet its short-term debt obligations. In other words, liquidity ratios measure the ability of an organization to pay short-term liabilities when they fall due. Profitability ratios are those ratios which measure how well the profitability of an organization is being managed. Profitability ratios measure an organization s ability to create earnings relative to the organization s assets, sales, and equity. Asset management ratios are sometimes known as turnover ratios, because they measure an organization s ability to generate revenue from organizational assets. Asset management ratios measure the efficiency with which several different types of assets are being used by an organization, including inventory assets, fixed assets, and accounts receivable assets. Valuation ratios are sometimes referred to as market value ratios. In a broad sense, valuation ratios measure the economic status and financial standing of an organization in the wider marketplace, and give an indication of the investors opinion of the organization. Valuation ratios often compare a company s stock price against some other aspect of the business, for example comparing the market price per share to the earnings per share. Leverage ratios are sometimes referred to as debt ratios; and, predictably, they involve measuring the amount of debt carried by an organization. Leverage ratios compare the amount of organizational debt against some other metric, such as organizational income or equity. Any ratio can be described in several different ways. For example, a ratio of four to one could be displayed numerically in the following ways: 4:1 or 4/1 or 4-to-1 Page 4 of 15

In this course, we will describe ratios in text by writing out the word to. When a mathematical ratio calculation is displayed, we will use the colon method (4:1) of describing the ratio, and use the slash symbol (/) to indicate division. CHAPTER 2- LIQUIDITY RATIOS 2.1- Chapter Two Learning Objectives and Key Terms In this chapter, we ll examine liquidity ratios. Let s begin by reviewing the learning objectives for Chapter Two. By the end of this chapter, you should be able to describe the application of liquidity ratios. You should also be able to list three key liquidity ratios. There are two key terms for Chapter Two. They are: liquidity and obligation. The first key term for this chapter is liquidity. As used in this course, liquidity is a financial noun that describes the availability of liquid assets to an organization, business, or market. In other words, liquidity describes the extent to which an organization has the assets to meet immediate (or short-term) obligations. The next key term for Chapter two is obligation. Generally, an obligation describes some type of duty that ties two entities together. In this course, we will be focusing on debt obligations that arise in business settings. In a broad sense, the word obligation describes debt owed by an organization related to conducting business. 2.2- About Liquidity Ratios Like other categories of ratios, liquidity ratios are used by organizations to perform internal ratio analysis, as well as being used by outside interests. In a broad sense, liquidity ratios measure an organization s ability to pay short-term liabilities when they are due. Generally, liquidity ratios are calculated by dividing cash and other liquid assets by current liabilities. Liquidity ratios, in a theoretical sense, relate to the cash cycle of an organization. The cash cycle, also called the cash conversion cycle, describes the flow of cash in an organization, which begins with the payment for raw materials and ends with the receipt of cash for goods sold. In other words, the cash cycle is the amount of time, measured in days, that it takes an organization to convert resource input into cash flows. The shorter the cash cycle, the more efficiently the organization is performing; which usually leads to higher liquidity and lower risk of organizational failure. Internally, liquidity ratios are often used as a fundamental part of the financial planning and budgeting process. Especially when tracked over time, liquidity ratios can give the leaders and management of an organization fundamental insight about the stability of the organization as it moves forward. Liquidity ratios are often used by outside investors as part of researching an organization prior to investing. Because organizations that have trouble meeting current obligations are generally at higher risk Page 5 of 15

of bankruptcy, investors examine liquidity ratios for signs of current organizational instability that might lead to future insolvency. 2.3- Key Liquidity Ratios This lesson will describe the calculations used to perform three key liquidity ratios: The current ratio, the quick ratio, and the cash ratio. The most commonly-calculated liquidity ratio is known as the current ratio. The current ratio measures an organization s ability to meet short-term obligations. Typically, a current ratio result of 2 to 3 is considered positive. If the ratio result is smaller than 2 to 3, it might be an indication that the organization will have trouble paying obligations in the future. However, a current ratio result that is too high might indicate that an organization is not using assets effectively to grow. The current ratio is calculated by dividing current assets by current liabilities, as shown: Current ratio = current assets/current liabilities Another very common liquidity ratio is known as the quick ratio. The quick ratio is sometimes referred to as the acid test, and it measures an organization s ability to cover current debts using its most liquid assets. Unlike the common ratio, the quick ratio does not consider organizational assets that could not be quickly turned into cash. The quick ratio is often considered to be a true test of liquidity, because it is only concerned with liquid assets and those non-liquid assets that could be quickly turned into liquid assets. The quick ratio is calculated by first adding together cash, marketable securities, and accounts receivable. The resulting value is then divided by current liabilities, as shown: Quick ratio = (cash + marketable securities + accounts receivable) current liabilities A third liquidity ratio, the cash ratio, examines an organization s ability to pay current debt using only cash or cash equivalents, such as marketable securities. This ratio, more than the current ratio or the quick ratio, measures a company s ability to meet current obligations without having to convert assets. The cash ratio is calculated by first adding an organization s available cash resources to its marketable securities. The resulting value is then divided by current liabilities, as shown: Cash ratio = (cash + marketable securities) current liabilities Page 6 of 15

CHAPTER 3- PROFITABILITY RATIOS 3.1 Chapter Three Learning Objectives and Key Terms In this chapter, we ll examine profitability ratios. Let s take a moment to review the learning objectives for Chapter Three. By the end of this chapter, you should be able to describe ways that profitability ratios are used by investors and analysts. You should also be able to name five key profitability ratios. There are two key terms for this chapter. They are: profitability and performance. The first key term for Chapter Three is profitability. As used in this course, profitability simply describes the extent to which a business is able to earn profit. In a broad sense, after expenses related to the generation of revenue are paid, any revenue that remains will be considered profit. The next key term for this chapter is performance. Generally, performance describes the accomplishment of some task; as measured by applicable standards. In this course, the term performance is used to describe the fulfilment of a business obligation in a manner that releases the business from liabilities related to the obligation. 3.2- About Profitability Ratios Profitability ratios examine an organization s ability to earn a profit from sales, equity, and assets. Profitability ratios are sometimes called performance ratios, because they assess an organization s overall ability to earn a profit. Profitability ratios are used widely by external ratio analysts, and are especially important for investors. Analyzing these ratios can help to assess whether an organization is making money, whether organizational performance has been improving or declining, and how well the organization is being run. Profitability ratio analysis can be helpful when the profitability of one company is compared against the profitability of a similar company; however, profitability ratios are most helpful to investors when analyzed over time. In other words, some insight can be gained by, for example, comparing the profitability ratios of two local coffee shops for the same reporting period in order to assess which of the two businesses had greater overall profitability during that reporting period. However, much more reliable insight can be gained by making the same comparison of the same two shops over several reporting periods, in order to spot trends in profitability. 3.3- Key Profitability Ratios Profitability ratios indicate various aspects of an organization s profitability. There are five key profitability ratios: The gross profit margin ratio, the operating profit margin ratio, the net profit margin ratio, the return on assets ratio, and the return on equity ratio. The gross profit margin ratio indicates an organization s profit margin after deducting costs of goods sold. The gross profit margin ratio does not allow for the deduction of operating expenses, interest expenses, Page 7 of 15

or taxes. The gross profit margin is calculated by first subtracting the cost of goods sold from sales. The resulting value is then divided by sales, as shown: Gross Profit Margin = (sales cost of goods sold) sales The operating profit margin ratio indicates an organization s profit margin after deducting both cost of goods sold and operating expenses. The operating profit margin ratio does not allow for the deduction of interest expenses or taxes. The operating profit margin is calculated by first subtracting the cost of goods sold and operating expenses from sales to determine the earnings before income and taxes, or EBIT. The resulting value is then divided by sales, as shown: Operating Profit Margin = EBIT sales The net profit margin ratio is sometimes considered to be the bottom line of profitability, and it is one ratio that is closely examined by investors and analysts on a regular basis, because net profit represents the profit that is available to be distributed to shareholders. The net profit margin ratio indicates an organization s profit margin after all expenses have been paid, including interest expenses, taxes, and depreciation. The ratio is calculated by dividing net income by net sales, as shown: Net Profit Margin = net income net sales The return on assets ratio is sometimes referred to as the return on total capital, and it indicates the return earned on the total assets used by an organization. The return represents the net income available for distribution to shareholders plus the debt paid to creditors. The return on assets ratio is calculated by first adding net income to interest expenses. The resulting value is then divided by average total assets, as shown: Return on Assets = (net income + interest expenses) average total assets The return on equity ratio indicates the return earned by the investments of common stockholders. It describes the net income as a percentage of the average common equity, which is calculated as a simple average of the common equity from the beginning and ending balance sheets. The return on equity ratio is calculated by dividing net income by average common equity, as shown: Return on Equity = net income average common equity Page 8 of 15

CHAPTER 4- ASSET MANAGEMENT RATIOS 4.1- Chapter Four Learning Objectives and Key Terms In this chapter, we ll explore asset management ratios. Let s take a moment to review the learning objectives for Chapter Four. By the end of this chapter, you should be able to explain the usefulness of asset management ratios. You should also be able to name four key asset management ratios. There is one key term for Chapter Four: Assets. In a broad sense, an asset is some valuable or useful person, quality, or thing. As used in this course, the term assets will be used to describe property owned by an organization that has value; and is available to meet debt obligations. 4.2- About Asset Management Ratios Asset management ratios assess the efficiency with which an organization uses its assets to generate sales. Because of this, asset management ratios are sometimes referred to as efficiency ratios. When analyzing asset management ratios, it can be very helpful to calculate the cash conversion cycle of an organization. The cash conversion cycle, although not a ratio in the technical sense, is a very helpful metric that can give insight into the efficiency of businesses that rely upon product inventory. The cash conversion cycle looks at the amount of time, usually measured in days that an organization typically takes to convert invested capital into cash income. As a very simple example, the owner of a custom shoe store might buy leather and other supplies that will eventually be sold as shoes in the store. The number of days that it takes for the owner s initial investment to be converted into cash sales is the shoe store s cash conversion cycle. Of course, cash conversion cycles are rarely so simple to describe, and are made more complicated by the facts that businesses often use credit to obtain raw materials, and customers often use credit to purchase the end products. Additionally, raw materials are often purchased in both regular and irregular patterns. Despite the complexity involved with deriving a useful cash conversion cycle, the insight provided after calculating the cycle can be very helpful to business leaders and analysts; especially when examined in conjunction with asset management ratios. 4.3- Key Asset Management Ratios There are four key asset management ratios that we will cover in this lesson: The inventory turnover ratio, the fixed asset turnover ratio, the total asset turnover ratio, and the average collection period. Page 9 of 15

The inventory turnover ratio examines the relation between inventory levels and cost of goods sold. Low inventory turnover ratios may indicate that an organization is maintaining excessive levels of product inventory, or that inventory is not being sold quickly enough. High inventory turnover ratios may indicate low inventory levels or the possibility of an inventory shortage in the near future. The inventory turnover ratio is calculated by dividing the cost of goods sold by average inventory, as shown: Inventory Turnover Ratio= cost of goods sold average inventory The fixed asset turnover ratio examines the efficiency with which an organization uses fixed assets to generate sales. The fixed asset turnover ratio is calculated by first averaging the beginning and ending balance sheet values of net fixed assets to determine the organization s average net fixed assets. Sales are then divided by the average net fixed assets to find the fixed asset turnover ratio, as shown: Fixed Asset Turnover Ratio= sales average net fixed assets The total asset turnover ratio examines the efficiency with which an organization uses its total assets. The total assets of an organization are the sum of its current and net fixed assets. In order to calculate the total asset turnover ratio, the average total assets must first be determined by calculating a simple average of the total assets at the beginning and the end of a reporting period. The total asset turnover ratio can then be calculated by dividing sales by average total assets, as shown: Total Asset Turnover Ratio= The average collection period ratio, sometimes known as the days sales outstanding ratio, examines the average length of time that an organization must wait to collect cash after selling inventory on credit. This ratio is carefully studied by investors and lenders, as it can indicate how effective a company s credit policies are compared to industry norms. A low ratio indicates that an organization has strict credit policies, and gives debtors less time to pay. Higher ratios can indicate that the organization is too lax when it comes to collecting receivables. The average collection period ratio is calculated by first dividing an organization s annual credit sales by 365 (the number of days in a year). Receivables are then divided by the resulting value, as shown: Average Collection Period Ratio= sales average total assets receivables (Annual credit sales/365) Page 10 of 15

CHAPTER 5- VALUATION RATIOS 5.1- Chapter Five Learning Objectives and Key Terms In this chapter, we ll explore valuation ratios. Let s take a moment to review the learning objectives for Chapter Five. By the end of this chapter, you should be able to describe how analysts use valuation ratios to evaluate organizational and market trends. You should also be able to list four key valuation ratios. There are two key terms for Chapter Five. They are: valuation and trends. The first key term for this chapter is valuation. Generally, valuation is the process of determining the current worth of some asset. As used in this course, valuation describes the process of determining the value of an organization through the use of applicable mathematical ratios. The next key term for Chapter Five is trends. Generally, the word trend describes the overall direction in which change or development occurs. As used in this course, trends describe a general change in the way that a business (or market) is developing. Trend data is used to predict what is likely to happen next for a market, business, or organization. 5.2- About Valuation Ratios Valuation ratios are used to examine the market value of a company s stock in relation to some aspect of company performance, such as earning, dividends, or cash flows. Whenever the market value of a company s stock changes, valuation ratios change. Investors study valuation metrics on a regular basis, and many investors study key valuation ratios on a daily basis. Valuation ratios help investors to assess the attractiveness of a company s stock. In cases where an investor already owns stock in a company, that investor can monitor the company s valuation ratios, which gives more insight than simply monitoring the stock share value alone. In cases where an investor is considering buying stock in a company, the ratios can be studied in advance to observe predictive company trends. Unlike stock values, which only indicate the market value of a company s stock shares, valuation ratios look at the market value of shares in relation to the organization s performance. When tracked over time, valuation ratios can yield valuable trend data, which is then used to make more informed investment decisions. Additionally, valuation ratios effectively render complex financial statements into a more understandable format that is more easily evaluated by investors. Rather than studying many values from many financial statements over time, investors can examine valuation ratios to get a sort of condensed snapshot of company worth. 5.3- Key Valuation Ratios There are four key valuation ratios that we will cover in this lesson: The earnings to share ratio, the price to earnings ratio, the price to book value ratio, and the price to cash flow ratio. Page 11 of 15

The earnings to share ratio is the portion of a company s profit that is allocated to each outstanding share of common stock in the company. The earnings to share ratio is considered to be a measure of a company s profitability, and is calculated by first subtracting dividends on preferred stock from net income. The resulting value is divided by the number of average outstanding shares, as shown: Earnings to Share Ratio= (net income dividends from preferred stock) average outstanding shares The price to earnings ratio is the most widely reported, and widely used, valuation ratio. The price to earnings ratio examines the market value of a company s stock shares against the company s earnings. The price to earnings ratio is calculated by dividing the market price per share by the earnings per share, as shown: Price to Earnings Ratio= market price per share earnings The price to book value ratio is used to compare a stock s market value to its book value. Lower price to book ratios can indicate that there is a fundamental problem with a company, or might just indicate that the company s stock is undervalued. The price to book ratio is calculated by dividing the current closing price of a company s stock by the latest quarter s book value per share, as shown: Price to Book Value Ratio= current closing stock price latest quarter s book value The price to cash flow ratio examines the price of one share of a company s stock against the cash flow for that share. In a general sense, the price to cash flow ratio shows the dollar amount that an investor must pay for each dollar of cash flow generated by the share of stock. The price to cash flow ratio is calculated by dividing the market price per share by the cash flow per share, as shown: Price to Cash Flow Ratio= market price per share cash flow per share CHAPTER 6- LEVERAGE RATIOS 6.1- Chapter Six Learning Objectives and Key Terms In this chapter, we ll explore leverage ratios. Let s take a moment to review the learning objectives for Chapter Six. By the end of this chapter, you should be able to describe the main focus of leverage ratio analysis. You should also be able to name two key leverage ratios. There is one key term for this chapter: leverage. Page 12 of 15

In a broad sense, leverage describes the ability to influence a system. When applied to business, leverage describes the extent to which an organization is able to achieve a high level of returns as compared to the relatively small investment made to achieve the returns. 6.2- About Leverage Ratios Leverage ratios are used to examine an organization s methods of financing operations and meeting financial obligations. Leverage ratios are often examined as a way to predict a company s ability to pay both short-term and long-term debts. These ratios take into account both fixed and variable operating expenses. A company s debt levels are the main focus of leverage ratio analysis. Leverage ratios are sometimes known as debt management ratios. Leverage ratios examine the amount of an organization s capital which comes from loans, as compared to how much capital comes from owner equity. These comparisons help to assess how well the organization will be able to meet obligations in the future. Organizations with lower leverage ratios are usually considered to be lower-risk investments, and organizations with higher debt are considered more likely to be unable to meet obligations in the future. Although there are variations from industry to industry, a debt-to-equity ratio above two is considered to be a risky investment, where a debt-to-equity ratio of one is considered a safer investment. However, it should be noted that a company that has very low leverage ratios can also be a risky investment; because, in some cases, companies can use debt to build profit in a way that is not sustainable in the long-term. Leverage ratio analysis yields the most usable information when a company s debt ratios are first compared against the company s past debt ratios, and then compared against the same ratios for several companies of the same size within the same industry. 6.3- Key Leverage Ratios There are two key leverage ratios that we will cover in this lesson: The debt ratio, and the debt to equity ratio. The debt ratio examines the proportion of an organization s assets that are financed, through both shortterm and long-term debt. A high debt ratio indicates that a company is highly leveraged, and could also indicate that the company may have trouble securing future credit. In order to calculate this ratio, total debt must first be figured by adding the short-term debt of an organization to its long-term debt. The resulting value is then divided by the organization s total assets, as shown: Debt Ratio= total debt total assets The debt to equity ratio is the last financial ratio that we will discuss. Unlike many other ratios used by financial analysts, the debt to equity ratio can be calculated in several different ways. In a broad sense, the debt to equity ratio examines the relative proportion of debt and shareholder equity used to finance an organization s assets. This ratio is closely examined by analysts, and high debt to equity ratios often Page 13 of 15

are seen as an indication that an organization has been aggressive in using debt to generate growth. The simplest way to calculate the debt to equity ratio is to divide a company s total liabilities by shareholders equity, as shown; although sometimes only long-term, interest-bearing debt is used in place of total liabilities when performing the calculation. Debt to Equity Ratio= total liabilities shareholders equity 6.4- Further Reading In this lesson, we ll begin to wrap up our examination of key business ratios. Let s take a look at some other materials that may be helpful to you as you continue learning about these topics. When studying financial analysis, it can be very helpful to supplement your learning with relevant IRS publications. Specifically, you may wish to reference current IRS Publication 538-Accounting Periods and Methods; and IRS Publication 542- Corporations, as further reading. IRS publications can be viewed and downloaded for free by visiting www.irs.com/publications. There is also a special IRS telephone hotline especially for those who are licensed to practice before the IRS, including CPAs. The Practitioner Priority Service is a toll-free, national hotline that provides support for practitioners with account-related questions. The number for the Practitioner Priority Service is 866-860-4259. 6.5- Conclusion In this lesson, we ll conclude our study of key business ratios. The interpretation of financial statement data is essential to analysts, who calculate financial ratios as a way to compare significant aspects of organizational performance. Although the analysis of financial ratios in business is very complex, the ratios used in financial analysis are straightforward. Once a person understands the mechanics of calculating business ratio metrics, he or she can begin to understand the many ways in which these ratios can be analyzed. This concludes the video portion of TeachUcomp Inc. s Key Business Ratios. Please take some time to review the video lessons it may be helpful to replay the lessons which contained a lot of information or complicated concepts. Please also take time to complete the review questions independently of the video presentation, and study all of the evaluative feedback provided with the Review Questions Answer Key. Printable versions of both the Review Questions and the Answer Key can be found in the training interface. When you have completed a thorough review of the included course materials, please complete the final exam and submit it to us, using the instructions in the Submittal Form which can be accessed in the training interface. Page 14 of 15

Thank you for using TeachUcomp training materials! If you have any questions about this course, or need help submitting your final exam, please call us toll-free at 877-925-8080. Page 15 of 15