The enterprise value (EV) is a direct representative of the economic value of a company – in other words, how much money someone would have to pay in order to buy it. When you are valuing stock, it is very important to consider this number. Indeed, the market capitalization also doubles as a company’s price… Read more
When you want to understand how a certain company thrives in a particular industry, you need to have certain formulas in mind. An acronym for Earnings before Interest, Taxes, Depreciation, and Amortization, EBITA is very useful when it comes to understanding a company’s ability to generate profit. This will help you see its operating performance… Read more
The Sortino ratio is an alternative to the Sharpe ratio, as it isolates the effects volatility has on investments. This ratio is used to determine a portfolio’s performance adjusted for risk, by using the return below a minimally acceptable target. Basically, the Sortino ratio adjusts the return for the risk of an investment by checking… Read more
EBITA, short for Earnings Before Interest Taxes and Amortization, is a formula that calculates the operational profitability of a company by including the costs of the equipment – and excluding the financing costs. As one of many equations, accountants use this to ascertain the profitability and earnings of a company – and it’s almost on… Read more
Also called the interest coverage ration sometimes, the times interest earned ratio is a coverage ratio. It can calculate the proportionate amount of earnings that can be used in the future, in order to cover expenses for interest. However, sometimes it’s considered a solvency ratio too, and that’s because it can estimate how able a… Read more
Shortened from Earnings before Interest and Taxes, and also referred to as the operating income, is an equation that measures the operating profits of a particular company. It does so by subtracting the operating expenses and cost of goods that were sold from the total revenue of the company. This calculation tells you exactly the… Read more
Also known as the reward to volatility ratio sometimes, the Treynor ratio is basically a risk assessment formula. It can estimate the volatility in the market to calculate an investment’s adjusted risk value. So, this formula is usually used by investors to calculate how big the risk is for certain investments concerning the market’s volatility…. Read more
While the name may sound very fancy, this is actually a crucial method to understand the finance point of a company. Also referred to as the “DuPont model,” this financial ratio involves the ROE (return on equity) ratio – which is directly related to the company’s ability to increase its equity. To put it as… Read more
Every fundamental analysis tool works differently for every investor – so in order to understand the stocks, you need to know how to calculate them properly. High-growth stocks aren’t likely to show up on any stock screens, no matter how hard you want to find the dividend characteristics. As a value investor, or someone that… Read more
Were you looking for information about the Weighted Average Cost of Capital? In that case, you’re just in the perfect place! WACC is a financial ratio, and it’s used to estimate a firm’s financing and assets acquiring costs. It does so by comparing the equity structure and debt of the business. So, it basically calculates… Read more
The DPR (Dividend Payout Ratio) is the dividend amount that has been given to shareholders as payment – and which is in direct relation with the net income amount generated by the company in question. Simply put, the dividend payout ratio is the unit measuring the net income percentage – and which will be paid… Read more
If you’re here, it’s because you are most likely curious about what the working capital ratio is and how it works. Also called the current ratio, the working capital ratio is a liquidity ratio, and it’s used to estimate a company’s ability to repay its current liabilities with current assets. Therefore, it’s important as it… Read more