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