Financial Ratios Archives - Page 3 of 3

What Are the Advantages and Limitations of the Current Ratio? Key Points You Should Know

When you wish to evaluate a company’s performance, the best method to use is ratio analysis. The ratio analysis uses financial statements such as the income statement and the statement of financial position. One of the critical components of the financial ratio is the current ratio that measures the relationship between the current assets and […]

What Are the Advantages and Limitations of the Current Ratio? Key Points You Should Know Read More »

4 Important Points to Increase Return on Assets

Financial Ratios

Overview: Increasing or maintaining return on assets is one of the most important tasks that need serious attention from senior management of most big corporate companies. This is because of this ratio interested by the majority of shareholders, prospective investors, the board of directors, the management team, and staff. Yet, a group of stakeholders who

4 Important Points to Increase Return on Assets Read More »

List of Financial Ratios: 8 Profitability, 7 Efficiency, 5 Liquidity, 5 and Activity Ratios

Financial Ratios

Overview: Financial ratios are the tool that uses to assess an entity’s financial healthies. There are many types and classes of financial ratios that use or tailor based on their requirement. For example, profitability ratios are the group of financial ratios that use to assess an entity’s profitability by comparing certain performance again competitors as

List of Financial Ratios: 8 Profitability, 7 Efficiency, 5 Liquidity, 5 and Activity Ratios Read More »

How to Increase or Decrease the Return on Equity Ratio? 6 Areas That You Can Use

Equity Ratio

Overview: Return on equity is the ratio that to use to measure the performance that an entity could generate over the period to its total shareholders’ equity. This ratio uses the bottom line of the entity over the period compared to the averages total shareholders’ equity. The good or bad ratio is depending on the

How to Increase or Decrease the Return on Equity Ratio? 6 Areas That You Can Use Read More »

4 Limitations of Return on Equity You should Know

Financial Ratios

In this article, we will explain the major limitation of return on equity that you should know if you are going to calculate, read, analyze and use return on equity to make a decision. Before we start off with the limitation of return on equity, we have to understand the concept of return on equity,

4 Limitations of Return on Equity You should Know Read More »

Internal Rate of Return (IRR): Definition, Formula, Use, Problems, Example, and Analysis

Financial Ratios

What is the Internal Rate of Return? Internal Rate of Return is the rate or cost of capital that makes a project or investment’s Net Present Value exactly zero. The internal Rate of Return is quite important for management in decision-making for new investment proposals and performance appraisal. It is also used in performance appraisal

Internal Rate of Return (IRR): Definition, Formula, Use, Problems, Example, and Analysis Read More »

Return on Equity Ratio: Definition, Analysis, High Vs. Low, And Formula

Equity Ratio

Definition: Return on Equity (ROE) is one of the Financial Ratios use to measure and assess the entity’s profitability based on the relationship between net profits over its averaged equity. Two main important elements of this ratio are Net Profits and Shareholders’ Equity. Return on Equity (ROE) is the ratio that mostly concerns shareholders, management teams, and investors

Return on Equity Ratio: Definition, Analysis, High Vs. Low, And Formula Read More »

What is Contribution Margin? (Definition, Formula, Example, and Explanation)

Financial Accounting, Financial Ratios

Definition: The contribution margin is basically the sales price less variable cost. The contribution margin in percentages is calculated by sales price less variable cost and then divided by sales price. Mostly we use net sales to calculate the contribution. Variable costs are direct costs, including direct materials, direct labor, and other direct costs. The total

What is Contribution Margin? (Definition, Formula, Example, and Explanation) Read More »

Return On Assets Analysis: Interpret, Definition, Using, and more

Financial Ratios

What is Return on Assets? Return on Assets is one of the efficiency ratios used to measure and assess how efficiently the company’s assets are being used. The main indicators to measure the efficiency of assets in this ratio are Net Income and Total Assets. Return on assets is calculated by using net income over

Return On Assets Analysis: Interpret, Definition, Using, and more Read More »

Quick Ratio: (Definition, Formula, Example, and More)

Financial Ratios, Quick ratio

Definition: Quick Ratio is one of the Liquidity Ratios used to measure the company’s liquidity position, project, investment center, or profit center. The special characteristic of this ratio from the other Liquidity Ratios is that Quick Ratio taking account only cash and cash equivalent items for calculation and interpretation. It disregards other items which might not quickly convert

Quick Ratio: (Definition, Formula, Example, and More) Read More »