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 indicates
Financial Analysis
Inventory Turnover Ratio: Formula, Calculation and How to Read It
What's it: Inventory turnover ratio is a financial ratio to show the number of times companies convert their inventory into sales during a given period. It is useful for evaluating management effectiveness in managing inventory. The
Solvency Ratio: Formulas, Examples, and Calculations
What's it: The solvency ratio is a financial ratio to measure a company's ability to meet its long-term obligations. To calculate it, we divide the debt relative to the firm's capital or assets. Or, we compare a company's ability to generate
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 because the
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 it as an
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
Deferred Tax Assets: Meaning, Examples
What's it: A deferred tax asset represents an inflow of future tax-related economic benefits. It eventually returns to business in the form of tax relief, reducing future taxable income. For example, a company pays taxes early before they are