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
Financial Ratio
Current Ratio: How to Calculate and Interpret
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 current
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 some other
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 indicates
Days Payable Outstanding: How to Calculate and Interpret it
What's it: Days payable outstanding (DPO) is a financial ratio showing how many days on average it takes a company to pay its suppliers. We calculate it by dividing the number of days in a year by the accounts payable turnover
Accounts Payable Turnover Ratio: How To Calculate And Read It
What's it: The accounts payable turnover ratio is a financial ratio showing the number of times a company pays its suppliers over a year or accounting period. It measures the company's effectiveness in managing accounts