Articles , Page 9

Articles

Return on assets (ROA)

Return on assets (ROA) is one of profitability indicators reveals how much profit will be generated by unit of assets. It expresses how effectively the company manages its assets.   Calculation formula     * often average from the beginning and ending balance The numerator is

Current liquidity ratio / Working capital ratio

Current liquidity ratio / Working capital ratio is one of liquidity indicators, which informs us how many times the firm would be able to pay its current liabilities, if it converts all of its current assets to cash.   Calculation formula     Disadvantages    &nb

Tax shield

Tax shield is one of the reasons why is the use of debt cheaper than equity. This effect arises, because interest is usually tax deductible expense, while the dividend (profit sharing) is not.

Equity ratio / Equity to assets ratio

Equity ratio (Equity to assets ratio) is one of the indicators of indebtedness and financial structure. It expresses the ratio of equity to total assets. This indicator shows what proportion of assets will remain to the owners if the company pays out all the obligations. From the inverse perspective

Asset turnover ratio

Asset turnover ratio is one of the indicators of activity, which shows how efficiently the company manages its assets and expresses what revenues will be brought by unit of assets. Unlike ROA, Asset turnover ratio uses revenues in the nominator, ROA has a profit there.   Calculation formula

Inventory period / Days inventory outstanding

Inventory period (Days inventory outstanding) is one of the indicators of activity,  which indicates how many days is the inventory held in stock before it is sold. If we divide number of days in the year (365) by the indicator of Inventory period, we get the indicator of Inventory turnover ra

Return on costs (ROC)

Return on costs (ROC) is one of profitability indicators. It expresses the amount of profit attributable to unit total cost.   Calculation formula     Comparison it is particularly suitable for comparison within the company - especially as an indicator of changes in costs ov

Quick ratio / Acid test ratio

Quick ratio (Acid test ratio) is one of liquidity indicators, which informs us about how many times the firm would be able to pay its current liabilities, if it converts its short-term receivables and financial assets to cash. This indicator deducts the least liquid component from the current

Debt ratio / Debt to assets ratio

Debt ratio (Debt to assets ratio) is one of the indicators of indebtedness and financial structure. It expresses the ratio of debt to total assets. The higher is the indicator, the higher the level of debt and the associated risks. It must together with indicator Equity ratio / Equity to assets rat

Interest coverage / Times Interest Earned - TIE

Interest coverage (Times Interest Earned - TIE) is one of the indicators of indebtedness and financial structure.  It shows how many times the earnings before interest and taxes (EBIT) are higher than interest expense, or how many times can the earnings be reduced before it reaches the bor

Fixed assets turnover ratio

Fixed assets turnover ratio is one of the indicators of activity which shows how efficiently the company manages its fixed assets and expresses what revenues are generated by unit of fixed assets.   Calculation formula   Non-current assets are often the average from the beginnin

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

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