This ratio is used to quantify a Company’s effectiveness in collecting its receivables or money owed by customers. The shows how well a Company uses and manages the credit it extends to customers.
It is calculated by dividing Revenue from operations by average trade receivables.
Inventory Turnover is the number of times a Company sells and replaces it's existing inventory during a period.
It is calculated by dividing Revenue from operations by average inventory.
The Interest Coverage Ratio measures how many times a Company can cover its current interest payment with its available earnings.
It is calculated by dividing Earnings Before Interest (EBIT - Earnings Before Interest and Taxes) by Interest expenses on borrowings such as bonds, loans, lines of credit, etc..
Least Ideal Interest Coverage ratio > 3
The Current Ratio is a liquidity ratio that measures a Company’s ability to pay short-term obligations or those due within one year.
It is calculated by dividing the current assets by current liabilities.
Least Ideal Current Ratio > 1.25
The ratio is used to evaluate a Company’s financial leverage. It is a measure of the degree to which a Company is financing its operations through debt versus wholly owned funds.
It is calculated by dividing a Company’s total liabilities by its shareholder’s equity
Least Ideal Debt to Equity Ratio < 0.5
Operating Profit Margin is a profitability or performance ratio used to calculate the percentage of profit a Company produces from its operations.
It is calculated by dividing the Earnings Before Interest and Taxes (EBIT - Earnings Before Interest and Taxes) by Revenue from operations.
The net profit margin is equal to how much net income or profit is generated as a percentage of revenue.
It is calculated by dividing the profit for the year by Revenue from operations.
Return on Net Worth is a measure of profitability of a Company expressed in percentage.
It is calculated by dividing total comprehensive income for the year by average capital employed during the year.
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