Efficiency Ratios

Cash Turnover: Measures how effective a company is utilizing its cash. Formula: Net Sales Cash Sales to Working Capital (Net Working Capital Turnover): Indicates the turnover in working capital per year. A low ratio indicates inefficiency, while a high level implies that the company’s working capital is working too hard. Formula: Net Sales Average Working […]

Finance Leverage Ratio

Total Debts to Assets: Provides information about the company’s ability to absorb asset reductions arising from losses without jeopardizing the interest of creditors. Formula: Total Liabilities Total Assets Capitalization Ratio: Indicates long-term debt usage. Formula: Long-Term Debt Long-Term Debt + Owners’ Equity Debt to Equity: Indicates how well creditors are protected in case of the […]

Profitability Ratios

Net Profit Margin (Return on Sales): A measure of net income dollars generated by each dollar of sales. Formula: Net Income * Net Sales * Refinements to the net income figure can make it more accurate than this ratio computation. They could include removal of equity earnings from investments, “other income” and “other expense” items […]

Liquidity Ratios

Working Capital: Working capital compares current assets to current liabilities, and serves as the liquid reserve available to satisfy contingencies and uncertainties. A high working capital balance is mandated if the entity is unable to borrow on short notice. The ratio indicates the short-term solvency of a business and in determining if a firm can […]

Sources of Finance For Startups

Start-up businesses often have a difficult time finding sources of start-up business financing for their initial financing needs. It is often not possible to get bank loans because financial institutions aren’t interested in unproven businesses. Even with the best possible business plan, in the world of business and finance, you may not be able to convince […]

Ratio Analysis

Ratio analysis is the quantitative analysis of financial information from a company’s financial statements or share price. Ratios are key to financial analysis, as they provide input for evaluating and comparing a company to its peers, or to an industry benchmark. Ratios provide the vital signs used to measure corporate health, allowing investors to drill down […]

Letters of Credit

A letter of credit is essentially a financial contract between a bank, a bank’s customer and a beneficiary. Generally issued by an importer’s bank, the letter of credit guarantees an exporter will be paid once the conditions of the letter of credit have been met. Use: Letters of credit are used to minimize risk in […]

Smart Ways of Managing A Start-Up

Market evaluation   Do your homework on the market needs and how these needs are satisfied today. Who are the main players? What are the products and services available? What are the current prices? If you are launching a new product or service, do some market research to evaluate the size of the market and the likelihood […]

Frugal Habits of the Super Rich

We’ve all dreamed of striking it rich and never having to worry about money again, but anecdotal evidence suggests the wealth elite live surprisingly frugal lifestyles. Whether it keeps them grounded or simply comes by force of habit, here are the cost-cutting habits of the super-rich: Mark Zuckerberg – Live Below Your Means: He is […]