Of the basic business principles, economies of scale has the greatest impact on profitability over any other business principle. As an enterprise’s investment is spread over higher volume the cost per unit of production decreases.
Value Investing – Economies of Scale (Lesson 24) Read More »
The last of the leverage ratios isn’t really a pure leverage indicator but augments the debt ratio. This is the interest coverage ratio.
Interest Coverage Ratio Read More »
The difference between the sales price and the cost of the product or service rendered is known as gross profit margin.
Gross Profit Margin Read More »
A leverage ratio used to evaluate the financial integrity of a business is the debt to equity ratio. It is strictly a bottom half balance sheet ratio.
Debt to Equity Ratio Read More »
The net profit margin reflects the profitability of the company as a percentage of net sales. It is one of the performance ratios used in evaluating business.
Return on assets is one of the performance ratios used in business identifies the overall ability of management to efficiently utilize resources to generate a profit.
Break-even analysis is a managerial (cost) accounting tool used to examine the relationship of price to cost of a product. It also considers various sales volumes and the effect on profit given the different relationships of price to cost.
Break-Even Analysis – Fundamentals Read More »
The accounts payable turnover rate is a business activity ratio measuring the frequency of the company’s ability to pay its vendors and suppliers. The numerical value is customarily reported as an annual value. The higher the number, the more often the payables are cleared (paid). A ’12’ would indicate that all payables are paid every month (360 days/12 = 30 days). Ideal values exceed 20 as this indicates all accounts are paid on average at least every 18 days (360 days/20 = 18 days).
Accounts Payable Turnover Rate (Ratio) Read More »
One of the many ratios used in business, the inventory turnover rate is often misunderstood, miscalculated and misused.
Inventory Turnover Rate Read More »
Every business owner, especially young entrepreneurs, must understand how long-term debt is used to finance the purchase of fixed assets.
Fixed Assets To Debt Relationship Read More »
