What's it: The accounting and finance department is concerned with planning, managing, and controlling financial resources, including managing records and information related to business finances. In addition, the department is responsible for

# Finance

## Collateral: How it Works and Why It Matters

What's it: Collateral is a borrower's asset pledged when taking out a loan. They agreed to turn it over to the lender when they defaulted on the loan. For lenders, it aims to secure loan repayments and reduce the impact of a default. Meanwhile,

## Net Profit Margin: Formula, Calculation, Interpretation

What's it: Net profit margin is a profitability ratio to measure how much profit is left (in percent) after the company has covered all its costs, including interest expense and taxes. We calculate it by dividing net profit by revenue.

## Efficiency Ratio: Type, Formula, Interpretation

What's it: An efficiency ratio is a financial ratio to show us how well a company utilizes its assets in relation to its ability to generate revenue. Some examples include accounts payable turnover ratio, inventory turnover ratio, and accounts

## Activity Ratio: Types, Formulas, and Interpretations

What's it: Activity ratio is a financial ratio to measure how well a company manages its assets. We then relate it to revenue or expenses to pay suppliers. Some are useful for assessing a company's effectiveness in managing short-term assets

## Cash Flow Ratios: Examples, Formulas, and Interpretations

What's it: Cash flow ratios are financial ratios calculated by comparing the metrics in the cash flow statement with other items in the financial statements. For example, cash from operations (CFO) is a commonly used metric. It is an

## Valuation Ratio: Formula And Its Interpretation

What's it: A valuation ratio is a financial ratio in which we relate a company's financial soundness to its market value. We use it to determine how attractive a company's stock is. To calculate a valuation ratio, we compare a

## Liquidity Ratio: Examples, Formulas, How to Calculate

What's it: The liquidity ratio is a financial ratio to measure a company's ability to meet its short-term obligations. Commonly used ratios are the current ratio, cash ratio, and quick ratio. Their calculations are relatively easy because we

## Financial Ratios For Credit Rating Analysis

Financial ratios for credit rating analysis usually focus on answering the question, "how capable is the company generating sufficient cash flow to finance its obligations." Thus, it compares two metrics: its ability to generate cash and its