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.
Financial Ratio
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
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
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