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Ratios Tell

In: Business and Management

Submitted By moonlv
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Ratios tell s a story

Airline—Data 10
This set of date has a extremely high dividend payout ratio 332.6% although it has a very low ROS 0.1% and ROE 0.8%. Under this kind of situation this company could still pay dividends over three times to net income, meaning it is a company with strong financial background and enough retained earnings from previous years. An Airline company would normally has enough money to pay dividends even it is not financially successful in this year; and to some extent is has to pay shareholders enough dividends to maintain continuous investment since Airline requires a lot of capital to run every year. At the same time it has only 0.1% cash but 25.1% account receivables. When people buy tickets they normally pay online by using credit card, so an airline company would have very little cash.

Railroad—Data 4
There is no inventory in this set of data. Railroad is a kind of company which has no inventory since it is just there and no inventory is needed. Also, cash has a high percentage 31.8% among all current assets. People driving pass one railroad would normally pay cash instead of using card.

Pharmaceutical—Data 7
This set of data has the highest cash percentage among all the sets, 46.1%. A pharmaceutical company is able to have great cash flow since it does not always need a lot of capital to keep the day-to-day running. Because a pharmaceutical company has to do a lot of research and experiment, it will have more research & development expenses than other companies do.

Commercial banking—Data 1
This set of data also has an extremely high dividend payout ratio 340% when it is not earning a lot of profit. A commercial banking has the this kind of financial ability to pay out dividends since it has a lot of money in hand. There is a negative contributed capital -8.3%. Affected by 2008 financial crisis, less capital are being…...

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