Price to Cash Flow Ratio

Price to cash flow ratio is a very important valuation ratio. Often investor’s use this to evaluate various companies so that they could make investment. Formula It is calculated by dividing the current market price of the share by the…

Gross margin ratio

Gross margin ratio is a profitability ratio and is also called gross profit ratio. It is calculated by dividing the gross profit by the revenue figure. Formula Gross margin ratio = Gross Profit / Revenue Gross profit can be found…

Net profit margin

Net profit margin is the profitability ratio. It is used to identify the percentage of revenue left after paying for all types of expenses. Formula It is calculated by dividing the net profit figure by the net sales figure. Net…

Return on Capital Employed (ROCE)

Return on capital employed is the profitability ratio and is used to analyze the return shareholders are earning over their amount of capital invested. It is denoted by ROCE. Formula It is calculated by dividing the profit before interest and…

Return on Equity (ROE) Ratio

Return on equity ratio is a profitability ratio. It is invaluable performance indictor for the investor. Investors base their decision over this ratio while making any decision. It is actually an indicator regarding the management’s efficiency of generating earnings from…

Cash Conversion Cycle

Cash conversion cycle is an important financial ratio as it helps the company in calculating the number of days it takes to convert its accounts receivable and inventories into cash. It is also called Net Operating Cycle and is denoted…

Defensive Interval Ratio

Defensive internal ratio is an important liquidity ratio which helps a company understand its liquidity in such a way that it could be aware of how much quick assets it has to repay  its daily expenses. During this, we assume…

Cash Ratio

Cash ratio is the most liquid financial ratio in accounting. It is used to know if the company has cash and cash equivalent to repay its current obligations. Here, we do not add any stock, prepaid advance payments, marketable securities and accounts receivable to arrive at…

Current Ratio

Current ratio is the most popular and fundamental financial accounting ratio. It shows the company ability to repay its short term liabilities. It can be calculated by dividing current assets by current liabilities. In order to run business without any cash flow problems,…

Quick Ratio

Quick ratio is also a very fundamental ratio. It is more liquid ration than the current ratio. In this ratio, we calculate liquid asset which is calculated by subtracting stock/ inventory and advance prepaid payments from the total current assets.…