Financial Ratios

Debt Ratio: Definition, Using, Formula, Example and More

Definition: Debt Ratio is the Financial Ratio that use to assess and measure the financial leverage of the entity over the relationship between total debt (long term and short term debt) and total assets. Basically, if the ratio is higher than one, that means the total liabilities are higher than total assets which means the […]

Liquidity Ratios (Definition, and List of Five Importance Ratios)

Definition: Liquidity Ratios are the group of Financial Ratios normally used for analyzing and measuring the entity’s liquidity position concerning the relationship between current assets and liabilities. These ratios are the Current Ratio, Quick Ratio, Cash Ratio, Working Capital Ratio, and Time Interest-Earning Ratio. The liquidity Ratio normally focuses on the group of ratios that

Profitability Ratios Analysis: Example | Types | Explanation | Importance

Definition: Profitability Ratios are the group of Financial Ratios used to assess and analyze the entity’s profitability through various ratios. These ratios focus on sales performance, cost management, asset efficiency, and sometimes cash flow management. The high or increase of these ratios implicitly means the entity is financially performing well. The high growth of these

Asset Management Ratios: Definition, Formula, Example, More

Definition Asset management ratios are a group of metrics that show how a company has used or managed its assets in generating revenues. Through these ratios, the company’s stakeholders can determine the efficiency and effectiveness of the company’s assets management. Due to this, they are also called turnover or efficiency ratios. As the name suggests,

Net Operating Assets: Definition, Formula, Usages, and Limitation

Definition: Net Operating Assets can be defined as the assets within a business that is related to the operations of the business. It is defined as the difference between the operating assets of the company and the operating liabilities of the company. Net Operating Assets represent how many assets and liabilities the business has at

Degree Of Operating Leverage: Explanation, Formula, Example, and More

There are many different methods to do the financial analysis of a company. Ratio analysis is the most commonly used method for assessing a firm’s financial health, profitability, and riskiness. Most investors and third-party stakeholders use the most common financial ratios for measures, including return on equity, price to earnings, and financial leverage. Operating leverage

What are the Gearing Ratios? Definition, Formula, And Is It similar to Debt-Equity Ratio?

Definition and Explanation The gearing ratio is the group of financial ratios that compares the owner’s equity in the company, debt, or the number of funds the company borrows. Gearing can be defined as a metric that measures the company’s financial leverage. The key four ratios include Time Interest Earned, Equity Ratio, Debt Ratio, and

What is Annualized Total Return? And How to Calculate it?

Investors can hold several assets as a part of their portfolio. Usually, these assets come from various classes. Investors invest in those classes to ensure they can achieve diversification in their portfolios. However, achieving a diversified portfolio isn’t the only crucial factor when choosing assets. Investors also consider the risks and returns associated with their

What is the Advertising to Sales Ratio? And How to Calculate It?

Financial ratios are numerical values that calculate the relative magnitude of one financial figure to another. Usually, it looks at the comparison between two financial items. These items may relate to the balance sheet or income statement. In some instances, they may also consider the statement of cash flow figures. However, these ratios reveal more

How to Calculate Activity Ratios?

Accounting ratios compare the relative magnitude of a financial figure to another. These ratios help stakeholders understand a company’s operations better. In most circumstances, accounting ratios require metrics from financial statements. However, these metrics may not provide crucial information on their own. Therefore, by putting them through these ratios, stakeholders can obtain better insights into