What's it: The fixed-asset-turnover ratio is a financial ratio to measure how productively and efficiently a company uses its fixed assets to generate revenue. Fixed assets include production machinery, equipment, motor vehicles,
Financial Ratio
Types of Financial Ratios: Their Analysis and Interpretation
Financial ratios are important metrics for analyzing a company's finances. In rating or stock analyst reports, we will find various ratios. Likewise, banks also use various ratios to measure a company's financial health. Ratios provide them
Fixed Charge Coverage Ratio: Calculation and Interpretation
What's it: The fixed charge coverage ratio is a financial ratio to measure how well a company can cover interest and lease payments. Both represent fixed costs, which the company has to pay regardless of whether the company generates
Pretax Profit Margin: Its Calculation and Interpretation
What's it: Pretax profit margin is a profitability ratio to measure how successfully a company converts revenue into profit before part of it is paid out as tax. We calculate it by dividing profit before tax (pretax profit) divided by
Profitability Ratio: Formulas, Types, and Examples
What's it: Profitability ratio is a financial ratio to measure the company's ability to generate profit. Profitability ratios are a key driver of a firm's value and hence, an important factor for valuing its share price. As a result,
Asset Turnover Ratio: Calculation and Interpretation
What's it: The asset turnover ratio is a financial ratio to measure the overall efficiency of business operations. It shows how well the company utilizes its resources to generate revenue. We divide revenue by the average total assets
Defensive Interval Ratio: Importance, Calculation, and Interpretation
What's it: The defensive interval ratio is a financial ratio to measure how long a company can continue to meet daily expenses using existing liquid assets without obtaining additional financing. We calculate it by adding up liquid
Cash Ratio: Formula, Calculation, and Interpretation
What's it: The cash ratio is a financial ratio to measure a company's ability to meet its short-term liabilities. It is the most conservative ratio in measuring liquidity compared to the current ratio or quick ratio. This is because it
Cash Conversion Cycle: How it Works, Calculation and Interpretation
What's it: The cash conversion cycle measures how long, in days, it took a company to collect cash since the money was spent on buying raw materials. The shorter the cycle, the faster the company generates cash from its investment in selling
Debt-to-Assets Ratio: Calculation and Interpretation
What's it: The debt-to-assets ratio is a leverage ratio to measure the extent to which a company depends on debt to finance its assets. We calculate it by dividing total debt by total assets.Debt is a capital alternative to equity. When a
Debt-to-Capital Ratio: How to Calculate and Interpret
What's it: The debt-to-capital ratio is a leverage ratio calculated by dividing the total debt by the company's total capital. Total capital equals total debt plus total equity.A higher ratio indicates high leverage. A company depends more
Debt-to-Equity Ratio: Calculation and Interpretation
What's it: The debt-to-equity ratio is a leverage ratio by compares the relative proportions of a company's capital structure. Specifically, it measures how much debt capital is compared to equity capital.A higher ratio indicates higher