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 […]

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 […]