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Finance

Financial Statements

Net Profit Margin: Formula, Calculation, Interpretation

By Ahmad Nasrudin · Updated on April 17, 2022

Net Profit Margin Formula Calculation Interpretation

What's it: Net profit margin is a profitability ratio to measure how much profit is left (in percent) after the company has covered all its costs, including interest expense and taxes. We calculate it by dividing net profit by revenue.

Tags: Financial Ratio, Net Profit, Profitability Margin, Profitability Ratio

Finance

Collateral: How it Works and Why It Matters

By Ahmad Nasrudin · Updated on February 3, 2022

What's it: Collateral is a borrower's asset pledged when taking out a loan. They agreed to turn it over to the lender when they defaulted on the loan. For lenders, it aims to secure loan repayments and reduce the impact of a default. Meanwhile,

Tags: Collateral, Debt, Loan

Financial Statements

Efficiency Ratio: Type, Formula, Interpretation

By Ahmad Nasrudin · Updated on April 15, 2022

What's it: An efficiency ratio is a financial ratio to show us how well a company utilizes its assets in relation to its ability to generate revenue. Some examples include accounts payable turnover ratio, inventory turnover ratio, and accounts

Tags: Financial Ratio

Financial Statements

Activity Ratio: Types, Formulas, and Interpretations

By Ahmad Nasrudin · Updated on April 17, 2022

What's it: Activity ratio is a financial ratio to measure how well a company manages its assets. We then relate it to revenue or expenses to pay suppliers. Some are useful for assessing a company's effectiveness in managing short-term assets

Tags: Activity Ratio, Financial Ratio

Financial Statements

Cash Flow Ratios: Examples, Formulas, and Interpretations

By Ahmad Nasrudin · Updated on April 17, 2022

What's it: Cash flow ratios are financial ratios calculated by comparing the metrics in the cash flow statement with other items in the financial statements. For example, cash from operations (CFO) is a commonly used metric. It is an

Tags: Cash Flow Ratios, Financial Ratio

Financial Statements

Liquidity Ratio: Examples, Formulas, How to Calculate

By Ahmad Nasrudin · Updated on April 17, 2022

What's it: The liquidity ratio is a financial ratio to measure a company's ability to meet its short-term obligations. Commonly used ratios are the current ratio, cash ratio, and quick ratio. Their calculations are relatively easy because we

Tags: Financial Ratio, Liquidity Ratio

Financial Statements

Financial Ratios For Credit Rating Analysis

By Ahmad Nasrudin · Updated on April 17, 2022

Financial ratios for credit rating analysis usually focus on answering the question, "how capable is the company generating sufficient cash flow to finance its obligations." Thus, it compares two metrics: its ability to generate cash and its

Tags: Credit Rating, Financial Ratio

Investment

Valuation Ratio: Formula And Its Interpretation

By Ahmad Nasrudin · Updated on April 17, 2022

What's it: A valuation ratio is a financial ratio in which we relate a company's financial soundness to its market value. We use it to determine how attractive a company's stock is. To calculate a valuation ratio, we compare a

Tags: Financial Ratio, Valuation Ratio

Accounting and Finance

What are the Invoice Factoring Advantages and Disadvantages

By Ahmad Nasrudin · Updated on April 14, 2022

The invoice factoring service has several advantages and disadvantages. Allowing the company to get cash immediately is its main advantage. However, using the services of a factoring company requires the company to spend money to pay fees. What

Tags: Invoice Factoring, Source of Finance

Financial Statements

Current Ratio: How to Calculate and Interpret

By Ahmad Nasrudin · Updated on April 17, 2022

What's it: The current ratio is a financial ratio to measure liquidity by considering all short-term assets and liabilities. It is the loosest ratio among other liquidity ratios such as quick and cash ratios. We get the current

Tags: Financial Ratio, Liquidity Ratio, Quick Ratio

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