Definition: The debt to equity ratio is the debt ratio that is used to measure the entity’s financial leverages by using the relationship between total liabilities and total equity at the balance sheet date. Bankers, creditors, shareholders normally use the debt to equity ratio, and investors to provide the loan, extend credit terms, and an […]
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Overview: Accounts Receivable Turnover is the efficiency ratio that directly measures the performance of receivable collecting activities over the year. It uses to analyze the number of times that net credit sales during the period are collected based on the relationship between net credit sales during the period and averaged accounts receivable at the end
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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,
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Definition: Fixed Charge Coverage Ratio is one of the Financial Ratios used to measure an entity’s ability to pay interest expenses and fixed charge obligations from its profit before interest and tax. Fixed charge simply mean assets or similar kind that company use to secured loan that it borrow from the bank. The assets that
Fixed Charge Coverage Ratio: Definition | Using | Formula | Example | Explanation Read More »
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 »
Overview: Net Working Capital is the net of total current assets of an entity with its total current liabilities. When we want to assess the liquidity problems in the company, networking capital is one of the most important items to be included. Sometimes we use this ratio to assess how efficiently the company uses its
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Overview Return on Capital Employed is one of the profitability ratios used to assess the profits before interest and tax that the company could generate from its business by using shareholders’ Capital employed. Capital employed is the fund that shareholders injected into the company plus other Capital and long-term debt. In other words, the fund
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Definition: The interest Coverage Ratio is one of the Financial Ratios used to assess the profitability and abilities that interest expenses could be paid by profit before interest and tax. It assesses how profitable the entity could pay the interest liabilities or expenses. Most of the investors and shareholders will look very strictly to see
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In primitive accounting methods, the cash basis of accounting was a general practice. Either expenses or income was recorded once the cash was involved in the transaction. What is meant to say, if a sale occurs, it will not be registered as a sale in the accounts until the buyer pays the cash. It adds
Accounts Payable Turnover Ratio: Definition, Using, Formula, Example Read More »
Inventory Turnover Ratio: The Inventory Turnover Ratio is one of the Financial Ratios used to assess how often the inventories are replaced and sales performance over a specific period. This ratio is normally used to assess how well the inbound and outbound system of inventories are, based on the strong relationship between the Cost of
How to Calculate Inventory Turnover Ratio? (Definition, Using, Formula, and Example) Read More »
