Before we engage in explaining the formula, you need to know what the difference between a shareholder and a stakeholder is. A shareholder holds a part of the company through shares of stock and a stakeholder is interested in the performance of a company. With these being said, it’s time to explain what Return on… Read more
Have you heard the term “expense ratio”, but it confused you? In that case, you’ve come to the right place, because you’re going to find out more about it. It is basically an efficiency ratio, and it calculates the expenses for management as a percentage of total funds that are invested in a mutual fund…. Read more
If you are the accountant of a business, there are certain things that you may want to keep in mind –one of these things being how to calculate the Return On Investing Capital (ROIC). ROIC is responsible for measuring the profitability of a company in relation to capital invested in the business. Is growth all… Read more
An equity ratio calculates the number of assets financed by owners’ investments. Basically, it does so by comparing the total equity in the company to the total assets. Moreover, you need to know that the equity ratio is a solvency ratio or investment leverage. This ratio features two important financial concepts for a sustainable and… Read more
As an investor, you will want to know that the company you are placing your bets on will bring a high return. Regardless of you are a bondholder or a shareholder, a high return on investment will ensure that you are actually profiting from this business. This is particularly why you might want to make… Read more
RONA – It may sound like some fancy name for a fancy person, but it’s actually the name of a finance formula – albeit one that is just as fancy. This performance ratio can compare the generated income from a company to fixed assets needed to get the income. Hence, with this formula, you can… Read more
You may be wondering what equity multiplier means. Well, it’s a leverage ratio that basically measures the part of the company’s assets financed by equity. So, it shows the percentage of the assets that are owned or financed by shareholders. Moreover, this multiplier can show the level of debt that was used by a company… Read more
A company needs a fair number of operating assets in order to continue functioning. This is practically what keeps the company going. The return on operating assets (ROOA) turns that in a percentage – in other words, it calculates how much a company earns by investing in that operating asset. But what is, precisely, this… Read more
The amount of money you allocate for the growth of the company tells a lot about the growth potential of a company, as well as its efficiency. A higher return on retained earnings (RORE) would suggest that reinvesting in the business should be the next course. A lower return, however, would say that you ought… Read more
This financial ratio is used to show how efficient a company is at using its revenue in order to generate profits. Also called the operating profit margin, return on sales determines a certain company’s performance by showing what exact percentage of total company revenues are converted into company profits. As this financial ratio shows exactly… Read more
If you want to see for how long you have to invest your money in order to double it, with a given interest rate, then you will most certainly use the rule of 72. Basically, this is used to determine the number of years in which your money will double in value with compounding interest…. Read more
This efficiency ratio is used to measure if a company is efficient at managing its non-operating expenses in order to generate sales during the normal course of a company’s operations. Basically, the sales to administrative expenses ratio shows if a company is using its fixed cost in order to manage its operations smoothly in an… Read more