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

# Financial Statements

## Quick Ratio: Formula, Calculation, Interpretation

What's it: The quick ratio is a financial ratio to measure liquidity by excluding some less liquid accounts such as inventory. It tells us how much more liquid current assets can cover short-term liabilities. Inventories and some other

## Working Capital Turnover: Formula, Calculation, and Interpretation

What's it: Working capital turnover is a financial ratio to measure how efficiently companies use their working capital to generate revenue. We calculate it by dividing revenue by the average working capital. A higher ratio indicates

## Days Payable Outstanding: How to Calculate and Interpret it

What's it: Days payable outstanding (DPO) is a financial ratio showing how many days on average it takes a company to pay its suppliers. We calculate it by dividing the number of days in a year by the accounts payable turnover

## Accounts Payable Turnover Ratio: How To Calculate And Read It

What's it: The accounts payable turnover ratio is a financial ratio showing the number of times a company pays its suppliers over a year or accounting period. It measures the company's effectiveness in managing accounts

## Days of Inventory on Hand: Formula and How to Calculate

What's it: Days of inventory on hand (DOH) is a financial ratio showing how many days on average a company converts its inventory into sales. It is inversely related to the inventory turnover ratio. A lower DOH is preferable because

## Accounts Receivable Turnover: Formula, Calculation, How to Read It

What's it: Accounts receivable turnover is a financial ratio showing the number of times a business converts accounts receivable into cash. Since accounts receivable represent a potential source of cash inflows for the company, a low ratio can

## EBIT Margin: Calculation and Interpretation

What's it: EBIT margin is a profitability ratio to measure how efficiently a company converts its revenue into profit before paying interest and taxes. We calculate it by dividing EBIT by revenue. A high ratio is better because the

## NOPAT Margin: Formula, Calculation, and Interpretation

What's it: NOPAT margin is a profitability ratio to measure how efficiently a company generates profit from its core business after accounting for expenses paid as taxes. We calculate it by dividing NOPAT by revenue. We use it as an