# Financial Ratios

## What Is a Good Acid Test Ratio? Here Is What You Should Know

Accounting ratios are metrics that allow stakeholders to calculate the relative magnitude of two selected values. These values come from a company’s financial statements, usually the balance sheet and income statement. Usually, stakeholders use various accounting ratios, which fall under several categories. For example, these may include liquidity, profitability, leverage, etc. In most circumstances, accounting […]

## What is the Book-to-Bill Ratio? (Formula, Calculation, and Example)

For companies, calculating and analyzing metrics provides meaningful information about various aspects. Companies use metrics to measure their performance in various fields. Similarly, these metrics help them determine how they are doing compared to historical information or other companies. The use of these tools differs from one company to another. Similarly, over time the requirements

## Break-Even Point Analysis: Definition, Using, Formula, and Example

The break-even point (BEP) analysis is the evaluation of the minimum revenue required for a company to continue its operations. At BEP, a company neither makes profit nor loss. It helps a company set budgets and targets for a minimum production level. However, finding that point in terms of units produced and sales is difficult.

## How To Calculate Coefficient Of Correlation? (Explanation)

Statistics have extensive implications in every field and industry, from pharmaceuticals to sports. On one side, the probability is used to find the chances of the desired outcome in sports; the statistical analysis guides the data collection and analysis in a census. Similarly, the financial management of any business entity is incomplete without statistical analysis.

## What is Operating Profit? (Definition, Using, Formula, And More)

Definition: Operating Profit is the type of profits recorded in the entity’s financial statements for the period after the deduction of operating expenses from Gross Profit. This profit is before charging interest expenses and tax expenses of the period. Operating Profit is reported in Income Statements rather than Balance Sheet. All other non-operating profits and expenses

## The Current Ratio: Formula, Example, Calculation, And More

Overview The current ratio is the measure of the short-term liquidity of a company. It shows the ability of a company to meet its short-term liability through its current assets. It is important to understand the current ratio, how it works, and what information it provides to the users. It does not offer much as

## Operating Performance Ratios Analysis (Definition | Using | Formula | Example | Explanation)

Overview Operating performance refers to evaluating a company’s ability to utilize its resources efficiently. It can be measured in terms of assets and equity sources. The focus of operating performance analysis is to analyze the efficient use of resources to generate sales. Another way of looking at operational performance is the conversion of sales into

## Debt to Income Ratio: Definition, Formula, Example, and More

A business entity, either small or large, has a combination of capital sources. The two most common sources of capital financing are debt and equity. The external stakeholders want to analyze if the company will be able to pay back the debt on time. Ratio analysis helps the stakeholders to analyze and compare different financial

## Debt to Income Ratio: Definition, Formula, Example, and Analysis

Definition A debt-to-income ratio, also known as DTI, is a measure of the ability of a business or a borrower to pay back their debts. This ratio measures the monthly debt payments of a business or borrower against its monthly gross income. In this case, the monthly debt payment comprises monthly bills such as rent/mortgage,

## How to Calculate Return on Equity? (Formula, Example, and Explanation)

A business entity runs several financial analyses, ratios, and formulas to get insights into financial health and position. Some analyses are only useful for internal purposes. However, many analyses are equally beneficial for external as well as internal stakeholders of an entity. Financial ratios are widely used financial analysis that gives useful insights to external