Articles , Page 15
Liquidity indicators
Liquidity is the entity´s ability to convert its assets into cash for the purpose to settle its obligations, ideally with the lowest possible transaction costs. (14) Indicators of liquidity Liquidity indicators show the extent to which the current assets of the company in various forms cover its short-term obligations. Thus, the num...
Disadvantages of accounting profit
Profit as a basic profitability indicator used by companies has the following drawbacks: profit does not equal net inflow of money, costs do not equal expenditures and incomes do not equal receipts profit includes the results of operations that are ad-hoc and will not be repeated in the future various methodologies particularly in the ar...
Net present value (NPV)
Net present value (NPV) is a method for investment appraisal that is based on discounted cash-flow methodology. It shows the amount by which shareholder´s wealth would be increased. It is calculated as the total of present values of future relevant cash-flows over the project life. It comes out from relevant future cash-flows (free cash-flow)...
Standard costing
Standard costing is a cost accounting measurement basis that predicts unit costs and production quantities based on predetermined standards before the production even begins and as such it is an alternative method to historical cost accounting. It is suitable for production, which is standardized and mass or repetitive. Standard costing serves as...
Receivables collection period / Average collection period
Receivables collection period (Average collection period) is one of the indicators of activity, which indicates how many days it takes our customers to pay our receivables. If we divide the number of days in the year (365) by the Receivables collection period indicator, we get Receivables tur
Inventory turnover ratio / Stock turnover ratio
Inventory turnover ratio (Stock turnover ratio) is one of the indicators of activity, which shows how many times during the period (year) is a unit of inventories converted into revenues (i.e. is sold). Calculation formula Inventories are often the average from the beg
Payables turnover ratio
Payables turnover ratio is one of the indicators of activity, which shows how many times during the period (year) is a unit of payables purchased. Calculation formula Trade payables are often the average from the beginning and final balance. Interpretation and
Earnings per share (EPS)
Earnings per share (EPS) shows the amount of annual profit per a single share. It is important indicator used during investment decision-making. Calculation formula * Number of share is mostly the average for the period weighted by the number of days. EAT (PAT) is often reduced
Price to earnings ratio (P/E)
Price to earnings ratio (P/E) is one of the indicators of market value and capital market. It indicates how much are the investors willing to pay per unit of profit. The indicator is primary but not the only indicator used when making investment decisions. C
Price to book ratio (P/B) / Market value to book ratio (M/B)
Price to book ratio (P/B) or Market value to book ratio (M/B) is one of the indicators of market value and capital market. It is the ratio of the market value of shares with its carrying value. The carrying value may be measured in various ways, one of which may be shareholders' equity. &n
Days payable outstanding
Days payable outstanding is one of the indicators of activity, which reflects how many days it takes us on average to settle our payables. The indicator is well applicable during negotiating delivery terms with suppliers. Calculation formula Trade payables are o
Receivables turnover ratio
Receivables turnover ratio is one of the indicators of activity, which shows how many times during the period (year) is a unit of receivable converted into sales. Calculation formula Trade receivables are often the average from the beginning and final bal
Indicators of market value or capital market
Investors give their money into undertakings mainly for the purpose of obtaining: dividends capital gains from sale of business or its shares - if the market value of shares grows, the potential proceeds from their sale increase as well Market value indicators often use data about mark
Cash-flow per share
The indicator Cash-flow per share shows the amount of operating cash-flow per a single share. It is therefore similar to Earnings per share (EPS), but because it does not have profit, but cash-flow in the nominator, it general disadvantages of EPS resulting from the use of profit (especially ea
Dividend yield
Dividend yield is one of the indicators of market value and capital market. It is an important indicator used when making investment decisions. It helps assess what annual yield (dividend) is obtained by shareholders for each unit of share value held. Calculation formula
Du Pont analysis
Du Pont analysis is used to decompose the indicator of ROE and subsequently also ROA to other indicators. Therefore, it shows the components of ROE (ROA), which can then be analyzed in greater detail. Scheme