Financial Ratios

Cash Ratio: Definition: Using, Formula, Example, Explanation

A current asset ratio or simply a current ratio measures a company’s liquidity. It reveals the ability of a business to manage its current liabilities through highly liquid assets. Creditors and analysts can use this metric to assess short-term solvency. However, critics argue that it overstates short-term risks a business faces by excluding some critical …

Accounts Receivable Turnover: Formula, Definition, Using, Example, Explanation

Definition: Accounts Receivable Turnover is one of the most used efficiency ratios and activities ratios. This ratio is used to measure how efficiently the company’s assets and resources are managed and used. For example, how well the company turns its accounts receivable into cash? This ratio answers this question in time (like 15 times or …

Fixed Assets Turnover Ratio: Definition, Using, Formula and Example

Definition: Fixed Assets Turnover is one of the efficiency ratios used to measure how to efficiently of entity’s fixed assets are being used to generate sales. Like its formula, the main idea of Fixed Assets Turnover is to assess the number of a dollar that fixed assets contribute to generating sales and revenues. This ratio is …

Return on Investment (ROI): Definition, Usage, Formula, and Example

Definition: Return on investment is one of the profitability ratios used to measure the percentage of investing profits over the invested fund. Return on investment is popularly used for assessing the performance of investment centers, profit centers, investment projects, and companies. The main principle of return on investment is how much profit that investments project …

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

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 …

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 that normally use for analyzing and measuring the liquidity position of the entity by concerning the relationship between current assets and current liabilities. The group of these ratios is the Current Ratio, Quick Ratio, Cash Ratio, Working Capital Ratio, and Time Interest-Earning Ratio. Liquidity Ratio normally …

Profitability Ratios Analysis: Example | Types | Explanation | Importance

Profitability Ratios are the group of Financial Ratios that use for assessing and analyzing the entity’s profitability through various ratios. The areas that these ratios focus on are sales performance, costs management, assets efficiency, and sometimes cash flow management. The high or increase of these ratios implicitly means the entity financial performing well. The high …

How to Calculate Earnings Per Share? (Definition, Using, Formula)

Definition: Earnings Per Share is the proportion of profits available to shareholders over the average number of shares outstanding. It is s calculated by dividing the net profit or loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding. Earnings Per Share (EPS) is widely used as a measurement of the company’s performance and …

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

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 …