Ideas in this flowchart

• Financial measures of asset use, debt financing, depreciation, and per-share earnings
• Activity ratios measure how well a firm uses its assets.
• Debt ratios measure the degree and effect of using borrowed funds to finance operations.
• The debt-to-equity ratio is total liabilities divided by owners’ equity.
• The debt-to-equity ratio measures the relationship between debt financing and equity financing.
• Depreciation allocates an asset’s original cost across the years in which it is expected to produce revenues.
• Earnings per share is net profit divided by the number of common shares outstanding.
• Earnings per share measures the dollars earned by each share of stock.