What's it: The asset turnover ratio is a financial ratio to measure the overall efficiency of business operations. It shows how well the company utilizes its resources to generate revenue. We divide revenue by the average total assets
Finance
Defensive Interval Ratio: Importance, Calculation, and Interpretation
What's it: The defensive interval ratio is a financial ratio to measure how long a company can continue to meet daily expenses using existing liquid assets without obtaining additional financing. We calculate it by adding up liquid
Cash Ratio: Formula, Calculation, and Interpretation
What's it: The cash ratio is a financial ratio to measure a company's ability to meet its short-term liabilities. It is the most conservative ratio in measuring liquidity compared to the current ratio or quick ratio. This is because it
Cash Conversion Cycle: How it Works, Calculation and Interpretation
What's it: The cash conversion cycle measures how long, in days, it took a company to collect cash since the money was spent on buying raw materials. The shorter the cycle, the faster the company generates cash from its investment in selling
Debt-to-Assets Ratio: Calculation and Interpretation
What's it: The debt-to-assets ratio is a leverage ratio to measure the extent to which a company depends on debt to finance its assets. We calculate it by dividing total debt by total assets. Debt is a capital alternative to equity. When a
Debt-to-Capital Ratio: How to Calculate and Interpret
What's it: The debt-to-capital ratio is a leverage ratio calculated by dividing the total debt by the company's total capital. Total capital equals total debt plus total equity. A higher ratio indicates high leverage. A company depends more
Debt-to-Equity Ratio: Calculation and Interpretation
What's it: The debt-to-equity ratio is a leverage ratio by compares the relative proportions of a company's capital structure. Specifically, it measures how much debt capital is compared to equity capital. A higher ratio indicates higher
Assets-to-Equity Ratio: Calculation and Interpretation
What's it: The asset-to-equity ratio is a financial ratio indicating the extent to which a company's assets are financed through equity. We calculate it by dividing total assets by equity. We can find this ratio in the DuPont
Interest Coverage Ratio: How to Calculate and Interpret it
What's it: The interest coverage ratio is a financial ratio to measure a company's ability to pay interest expense using the profit it generates. Earnings before interest and tax (EBIT) is a commonly used profit metric. It is then