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 the balance sheet date. It's also known as average … [Read more...] about How to calculate accounts payable turnover ratio
Finance
How to calculate Fixed assets turnover ratio – FAT
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 of company’s earnings. Company profit … [Read more...] about How to calculate Fixed assets turnover ratio – FAT
How to calculate inventory turnover ratio – ITR
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 materialsWork-in-progressFinished goods In retail business … [Read more...] about How to calculate inventory turnover ratio – ITR
How to calculate average collection period Ratio – ACP
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 invoiced amount from customers. Average collection … [Read more...] about How to calculate average collection period Ratio – ACP
How to calculate cash flow from investing and financing activities
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 from operating activities … [Read more...] about How to calculate cash flow from investing and financing activities
How to calculate cash flow from operating activities
Cash flow from company's operating activities shows the investors the amount of money a company brings in during the normal course of business. Operating activities are the most complex of the three sources shown in a statement of cash flow. This statement is prepared by taking the company's net profit shown in income statement and then a number of additions and … [Read more...] about How to calculate cash flow from operating activities
Relevance of financial statements in fundamental analysis
Financial statements are the cornerstone of fundamental analysis. It has three key financial documents: the income statement, balance sheet, and statement of cash flows. Publicly listed companies are required to follow financial reporting rules of the country in which they are listed. Most of these stock exchanges and financial rules in the country require companies to … [Read more...] about Relevance of financial statements in fundamental analysis
What is fundamental analysis and why it’s used by investors
Fundamental analysis is a process of analyzing every aspects of a company's operations in order to determine the value of a stock, known as intrinsic value of a share. This means, it will let you know what you are getting when you buy a stock. By using fundamental analysis, you can find out whether a stock is cheap or expensive by comparing its current market price to the … [Read more...] about What is fundamental analysis and why it’s used by investors
What is special purpose vehicle or entity – SPV/SPE
Special purpose vehicle or SPV is a project company that consists of consortium of shareholders specifically created to build and operate projects. It's also known as special purpose entity/corporation or project company. Special Purpose Vehicle can be formed either as a single legal entity or a joint venture consortium. The main motto for creating a SPV can be to purchase, … [Read more...] about What is special purpose vehicle or entity – SPV/SPE
Difference between Intrinsic value and Current market value
As a investor, before investing in a publicly traded company, you should know when a stock is over or undervalued. To find it out, the first thing you should know is the intrinsic value of a stock and then compare it with the current market price. In this article, we will be discussing the difference between intrinsic value and current market value of a publicly traded … [Read more...] about Difference between Intrinsic value and Current market value