Finance

We have many financial ratios to assess a company's efficiency in managing assets, liabilities and revenues in order to make profit. Working capital turnover ratio is one of such financial ratios. Working capital turnover ratio is calculated by using the following formula; Working capital turnover ratio = Net Annual Turnover or sales / average working capital Net … [Read more...] about Working capital turnover ratio: How to calculate and what it tells you

Company’s ability to generate positive cash flow is more important than profitability, because cash is needed to pay suppliers, employees and to take care of other expenses to continue as a going concern. A company that generates positive cash flow from its operating activities is at a better position than a company without positive cash flow. The company with positive cash … [Read more...] about Why cash flow is more important than a company’s net profit

Equity analysts use valuation ratio to make investment decisions. The most popular and widely used indicator among those is the P/E ratio. P/E ratio stands for Price to earnings per share ratio. In other words, the P/E ratio expresses the relationship between the current market price per share and the amount of earnings attributable to a single share. The other two important … [Read more...] about Valuation ratios: How to know value of a stock or security

All listed companies are bound to report their cash flow statement while announcing their annual financial results. Cash flow statement is part of the financial statements that the company publishes every year. For financial reporting purposes, business activities are classified into three groups: operating, investing and financing activities in the cash flow … [Read more...] about Understanding operating, financing and investing activities of the company

In simple words liquidity means how quickly you can get your hands on cash. In other words, how quickly you can get your money whenever you need it. For a company, liquidity means how quickly a company's assets can be converted to cash when it's bought and sold, or whenever you need cash. To measure liquidity of a company or organisation, certain universal financial … [Read more...] about Importance of liquidity ratios in financial analysis

Banks in India are mandated to mark their investments to prevailing market prices and charge the gains or losses to the profit and loss account, also known as mark to market gains or losses. You will also find mark to market concepts in future contracts.  In this article, you will learn what is Mark to Market losses and Gains and how its used. Mark to market losses or … [Read more...] about What is Mark To Market Losses and gains

Asset turnover ratio (ATR) measures the company’s ability to generate sales or turnover relative to the value of assets. It is used as a financial indicator by analysts to take an investing decision. Higher asset turnover ratio indicates that the management is more efficient in generating revenue from its assets. In contrast, a low ATR indicates inefficiency of the … [Read more...] about How to calculate asset turnover ratio

Profitability ratios are used by financial analysts to assess a company’s ability to generate earnings relative to its revenues for a period. It signals how efficiently the company has managed to generate profit and value for its shareholders.  Company’s ability to generate profits on capital invested is the most important factor in order to find out its value and the … [Read more...] about Profitability ratios: How to calculate and What do they tell you?

The most basic tendency of traders is to buy stocks at a price level that they consider is very low and to sell a stock at a price that they consider is relatively high.  When the majority of traders believe that price is relatively low, buying pressure overtakes the selling pressure and the price generally goes up. Likewise, when a majority of traders believe that a stock … [Read more...] about What is dynamic support and resistance levels in stock market

Solvency ratio measures the company’s ability to pay its long term debt obligations. Solvency ratio provides information related to the adequacy of cash flow and earnings to cover interest, other fixed costs and principal payments as they come due. In other words, solvency ratio measures the size of a company’s profitability and compares it to its obligations to assess the … [Read more...] about How to calculate solvency ratios and measure financial leverage of a company