Debt Ratio
The debt ratio reflects the percentage of assets covered by debt.
The fixed assets turnover rate is another activity ratio whereby an income statement financial characteristic is compared to a balance sheet asset section.
Activity ratios measure performance of a current asset on the balance sheet. The working capital turnover is the most encompassing of all the activity ratios.
The cash ratio is a much more effective tool for small business than the traditional current or quick ratio.
One of the activity ratios in business is the receivables turnover ratio or rate; it measures the frequency of collecting the entire balance of accounts receivable.
No other business term is so misunderstood, misstated, misleading or deceiving as the words ‘net profit’.
The current ratio is an inappropriate relationship to use or rely on in small business. The ratio is best suited for large publicly traded organizations.
Business ratios are used to compare companies of different sizes within the same industry.
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.
The last of the leverage ratios isn’t really a pure leverage indicator but augments the debt ratio. This is the interest coverage ratio.