Finance;
So the other night I'm working on my finance homework and I'm just not getting how to calculate a ratio. If you know finance the naming scheme for ratios is a little off.
For instance the calculation for Liabilities to Assets Ratio is (Total Liabilities/Total Assets) makes sense right.
Next Long-Term Debt Ratio is (Long-Term Debt/Total Assets) hmmmm ok well probably would have been easier to remember if they had included 'to Assets' in there but ok I can deal with this.
Then here comes Debt-Equity Ratio. You know something is wrong right away because its not Debt to Equity ratio and its not Debt ratio so they changed the naming scheme once again but this should still be simple enough right? just a normal (Total Debt/Shareholder Equity) right? Well first of all there is no 'Total Debt' line on any sheet so you would have to add together current portion of long term debt and long term debt and possibly Accounts Payable because that could be considered debt. Hence my confusion. Come to find out the when making this calculation you are supposed to use Long-Term Debt.........Why? Why couldn't you just be consistent with ratio names. It's not like you had to save room on the sheet. There were no character limits when this stuff was written and it's not like it was taking up more space than the "Cash flow from Operations to Current Liabilities Ratio so WTF. Honestly how many people got to vote on the names and was their a convention on each name and did they look at the names they had already put on the financial statements used to make these ratios?
I think it went some thing like this:
(Dave the accountant): Hey John we need to name these ratios but I need to embezzle from Big Corporate shmucks in an hour so we need to divide the work. Split it with me.
(John the accountant): Once I sober up from drinking on the job I need to go home and beat my wife so we need more help.
(Dave): You lie sir you haven't had a drink all day.
(John): nope been dropping acid and that baloon of coke that exploded in my anus yesterday still has me going.
(Dave): Where did you get the drugs?
(John): Bob in Payroll [yes accountants have payroll departments] he's so burnt out he gives them to me for free and ups my pay every time I bring Taco Bell.
(Dave): can he help?
(John): Guess so.
HEY BOB!!
(Bob the burnt out Junkie): I LIKE BUNNIES!!!!!
(Dave): Nice. We'll have this done in no time.
John crap me a line of coke. I need a pick me up before my next meeting.
