Interest coverage ratio measures the creditworthiness of a company by comparing earnings before interest and taxes (EBIT) with the interest. Its a financial ratio that measures company’s ability to make payments for debts. In other words, it gives a better picture to know the short-term financial health of a company. Here is the formula to … Read More » "How to calculate Interest coverage ratio"
In our last article we have discussed how to calculate total assets turnover ratio to know how effectively company is using its assets to generate sales. To compare a company’s net profit with the total investments or assets, analysts calculate return on investment ratio. Its popularly known as ROI. Return on investment (ROI) is a … Read More » "How to calculate return on investment (ROI)"
In our last article we have discussed about inventory turnover ratio to know how effectively the company is managing its stock of goods to make money. In this article we will show you how to compare inventory to net working capital. In current assets, inventory is considered as the least liquid asset even though company … Read More » "How to calculate Inventory to net working capital ratio"
In our last article we have discussed how to calculate fixed assets turnover ratio. In this article, we wants to measure how well the company has generated sales from its total assets during a particular period. As this ratio is a comparison of company’s total assets to the total revenue/sales, its known as total assets … Read More » "How to calculate total assets turnover ratio -TAT"
Off balance sheet financing means providing funds to a subsidiary or project company where project’s related assets, liabilities and others are held and not considering it into the liability and assets sides of parent or sponsor company’s balance sheet. In general, when a company need funds to expand its business by purchasing assets, hiring personnel … Read More » "Off balance sheet financing or OBS – How it works"
To find out how efficient the company is at paying to its creditors, suppliers or short term obligations, accounts payable turnover ratio is calculated. Accounts payable is a short term liability shown in the current liability section on the balance sheet. It shows how much a company owes to its suppliers and creditors as at … Read More » "How to calculate accounts payable turnover ratio"
Fixed assets turnover ratio determines how efficiently a company is using it’s fixed assets to generate sales. Its also known as efficiency ratio. Before getting into the calculation part, let us first understand why fixed assets turnover ratio is required. Business owners invest their hard earned money in to the company to get a piece … Read More » "How to calculate Fixed assets turnover ratio – FAT"
Inventory turnover ratio shows how often the company replaces its inventory or how well the company generates revenue out of its stock of goods. This ratio is most importantly used as a performance indicator in retail and manufacturing businesses. Inventory/stock of goods of a company includes followings: Raw materials Work-in-progress Finished goods In retail business … Read More » "How to calculate inventory turnover ratio – ITR"
The average collection period (ACP) of a company refers to the average number of days it takes to convert receivables into cash. It’s also known as days sales outstanding. In other words, it’s the average number of days company’s customers/clients takes to pay their bills or number of days taken by the company to collect … Read More » "How to calculate average collection period Ratio – ACP"
Statement of cash flow is a reconciliation of the cash flows from the firm’s three sources: operating, investing and financing. Analyzing these activities is extremely important as it provides investors a reconciliation of the beginning and ending cash position on the balance sheet. In our last article, we have discussed how to calculate cash flow … Read More » "How to calculate cash flow from investing and financing activities"