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

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 […]

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Return on Capital Employed: Definition, Using, Formula, Example, Explanation

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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What is Interest Coverage Ratio? (Definition, Using, Formula, Example, Explanation)

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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How to Calculate Inventory Turnover Ratio? (Definition, Using, Formula, and Example)

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

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

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

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The Concept of Predetermined Overhead Rate: (Formula, and Example)

Predetermined Overhead Rate Predetermined Overhead Rate is the overhead rate used to calculate the Total Fixed Production Overhead. It is part of the Absorption Costing calculation. The Predetermined Rate is usually calculated annually and at the beginning of each year. This rate will be recalculated if the predetermined is materially incorrect or different from the

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