## 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 …

## Accounts Payable Turnover Ratio: Definition, Using, Formula, Example

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 …

## 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 …

## 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 …

## Debt to Equity Ratio: Formula, Definition, Using, And Example

Definition: The debt to equity ratio is one of the liquidity ratios used to assess the liquidity problems of an entity by using total debts to total equity over a period of time. Debt to equity ratio concerns all debt, short-term and long-term debt over the total equity, including share capital, retain earning, and others. …

## 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 …

## What is the Variable Cost? (Definition, Formula, and Example

Definition: Variable Cost is the method that assumes the main cost of products is direct labor, direct material, and variable manufacturing overhead. These costs are fixed in units and variable in total. In other words, it is the cost that is variably attributed to the cost of the product. The variable Cost Concept is that …

## Income Statement: Definition, Types, Templates, Examples, and More

Definition: The income statement is one of the five financial statements that report and present an entity’s financial transactions or performance, including revenues, expenses, net profit, or loss, and other P&L Items for a specific period of time. This is also known as the statement of financial performance because it shows how the entity financially …

## Ultimate Guide to Financial Accounting (For Beginner)

Definition: Financial accounting is one of the essential functions of Financial Management in the Financial Department or Financial Division. Because of its usefulness and necessity,  we can say that this function is one of the strategic functions of the entity. This function is responsible for preparing financial reports, controlling the financial position and cash flow, …

## Operating Expenses: Definition, Example, Formula, and List

Definition: Operating expenses are the expenses incurred in the entity for its normal operational purposes and activities that generally include both the cost of products or services and sales & administrative expenses. Operating expenses are generally defined when identifying and assessing the theentity’ss operating profits. Like other income statement items, these expenses are recorded in …