Fin/370 - Week 1 Discussion Questions

What ratios measure a corporation’s liquidity? What are some problems associated with using such ratios? How would the DuPont analysis overcome these problems?

Loth (2012), “The current ratio is a popular financial ratio used to test a company's liquidity (also referred to as its current or working capital position) by deriving the proportion of current assets available to cover current liabilities” (para. 6).

One problem with using the current ratio is that the current ratio reflects current assets and liabilities, but is not so dependable for annual financial information. In other words, current ratios do not report the entire financial condition of the company. Only what is being recorded at a specific time.

The DuPont Analysis is a quick way of looking at a company’s status of assets in short term measurement.

According to "Investopedia.com" (2012), “A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are measured at their gross book value rather than at net book value in order to produce a higher return on equity (ROE). It is also known as "DuPont identity" (DuPont Analysis).

Reference

Loth, R. (2012). Liquidity Measurement Ratios: Introduction. Retrieved from

http://www.investopedia.com/university/ratios/liquidity-

measurement/ratio1.asp#axzz234mFXqaR

Investopedia.com. (2012). Retrieved from

http://www.investopedia.com/terms/d/dupontanalysis.asp#axzz234mFXqaR

What are three primary roles of the U.S. Securities and Exchange Commission (SEC)? How does the Sarbanes-Oxley Act of 2002 augment the SEC’s role in managing financial governance? Do you think businesses became more ethical after Sarbanes-Oxley was passed? Provide examples to support your answer.

According to U.S. SECURITIES AND EXCHANGE COMMISSION (2012), “The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital...