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
Finance
Invoice Factoring: Meaning, Importance, How it Works
What's it: Invoice factoring is a financing arrangement in which a company sells its invoices receivable to a finance company (called a factor or factoring company) in exchange for liquidity. The factoring company will pay cash from
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
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
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
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
Return on Assets (ROA): Calculation and Interpretation
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
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
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
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
Commodity Index: Meaning, Why It Matters, Examples, Affecting Factors
What's it: A commodity index tracks the price performance of a selected basket of commodities. Index issuers assign weights to selected commodities, the percentages of which vary according to the respective methodology. Some use
Venture Capitalist: Meaning, How it Works
What's it: A venture capitalist is a professional investor who invests in a new company, startup, or young company, in exchange for ownership. They are risk-takers because they invest money in high-risk businesses. New companies are
Going Private: Meaning, Reasons, Methods, Benefits
What's it: Going private is when a company's stock is no longer traded for the public. It is the opposite of going public, i.e., a company lists its shares on a stock exchange for trading by the public. And, when it is listed on the
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:
Breakeven Point: How to Calculate, Benefits, Pros, Cons
What's it: The breakeven point is the point where revenue equals total costs. At that point, the company's sales level is not high enough to profit but not low enough to incur a loss. Why is the breakeven point