In order to measure the amount of net income earned by a company with each dollar sales that are generated we use the profit margin ratio. Also known as gross profit ratio or the return of sales ratio, this is determined by comparing the net income with the net sales of a certain company. Basically,… Read more
Also a financial metric, the price to sales ratio is used to measure the value that the investors put on a certain company for each dollar of revenue that’s being generated by the said company. This is done by comparing the stock price with the total revenue of the business. The price to sales ratio… Read more
In today’s post, we’d like to focus our attention on the price to earnings ratio. This is a prospect ratio that calculates a stock’s market value. It does that by the market price per share with the earnings per share. With that in mind, this ratio indicates what the market is likely to pay for… Read more
The price of a company is compared to the underlying cash flow by using the Price to Cash Flow profitability ratio, also abbreviated as P/CF. Basically, this ratio is used to determine how much a certain company is worth based on the cash flow it is able to generate. The Price to Cash Flow ratio… Read more
The price to book ratio is renowned as an important financial valuation tool. Essentially, it is utilized in an attempt to appraise if a stock of a firm is undervalued or overvalued. It does that by comparing the net assets of the firm with the price of the existing shares. Fundamentally, it is supposed to… Read more
The present value is, many times, referred to as the discounted value – and it a widely used financial formula. So, what it is used for? Expressly, it estimates the amount of money that ought to be invested today, to equal the payment received on a specific future date. This concept is connected to the… Read more
This article will focus on presenting the specifications of the preferred dividend coverage ratio. This ratio assesses a corporation’s financial capability of paying the dividends owed to shareholders, depending on its net income. With that in mind, why do investors utilize it? That’s because it points how well a company is doing by comparing preferred… Read more
What does the PEG ratio stand for? Why is it used and how could we define it? This article focuses on answering these specific questions. The PEG ratio stands for price earnings to growth, being regarded as an investment calculation that assesses the value of a stock, considering the current earnings and the potential anticipated… Read more
The payback period is a financial capital budgeting method that estimates the amount of time needed for an investment to generate cash flow and replace the cost of the investment. So, it’s the amount of time it takes for an investment to get enough cash in order to pay for itself. It’s relevant to management,… Read more
The accounts payable turnover ratio is a liquidity ratio that indicates the ability a company has to repay its accounts payable. The repayment is done by comparing net credit purchases to the average accounts payable during a period. Basically, the accounts payable ratio shows how many times a firm can repay its average accounts payable… Read more
If you’ve accessed this page, you are probably eager to find out more about operating leverage. Well, operating leverage is a financial efficiency ratio that is used to calculate the percentage of total costs that are made up of fixed costs and variable costs. Basically, its aim is to find out how well a company… Read more
If you clicked on this article, you’re probably interested in operating income and what it means. Well, it will tell you what you need to know. Operating income is also called EBIT (Earnings before interest and taxes). Basically, it’s a profitability formula that estimates the profits of a firm derived from operations. Therefore, it calculates… Read more