What's it: Return on assets (ROA) is a profitability ratio to measure how well a company uses its assets to generate profits. This ratio tells us about the returns the company gets on its assets. We calculate it by dividing net profit

# Financial Statements

## EBIAT Margin: Formula, Calculation, and Interpretation

What's it: EBIAT margin is a profitability ratio to measure how efficiently a company generates profit from all its activities before paying interest expense while taking taxes into account. We calculate it by dividing EBIAT by

## Return on Common Equity (ROCE): Calculation and Interpretation

What's it: Return on common equity (ROCE) is a profitability ratio for measuring the return to common stockholders on their invested capital. It is an alternative to return on equity (ROE) by isolating returns to preferred

## Operating ROA: Formula, Calculation, and Interpretation

What's it: Operating ROA is a profitability ratio to measure how well a company is using its assets to generate profits from its core business. We calculate it by dividing operating profit by total assets. Operating ROA provides

## Cost of goods manufactured: Meaning, Components, How to Calculate

What's it: Cost of goods manufactured refers to the collection of production cost plus the change in work-in-process inventory. These production costs (or manufacturing costs) consist of direct material costs, direct labor, and factory overhead

## Gearing: Meaning, How to Calculate, Pros and Cons

What's: Gearing shows you how much a company depends on debt in its capital structure. It's a term in the UK and the same as leverage for the term in the United States. The company's capital structure is divided into two sources: debt and

## Operating Leverage: Why It Matters, How to Calculate it

What's it: Operating leverage shows you the extent to which a company's operating costs are dependent on fixed operating costs. If the company has high leverage, it shows that the company has a significant proportion of fixed costs. Meanwhile,

## Acid Test Ratio: Meaning, Formula, Calculation

What's it: The acid test ratio is a liquidity ratio to measure whether a company has sufficient cash to cover current liabilities using its liquid assets. First, we add up cash and cash equivalents, short-term investments, and accounts

## Return on Invested Capital (ROIC): Calculation and Interpretation

What's it: Return on invested capital (ROIC) is a profitability ratio to measure how much profit is generated for every dollar invested in the company. We calculate it by dividing net income by the total invested capital, expressed as