Inventory turnover is a financial ratio which indicates the resource tied up in inventory, therefore it measures how effectively the company manages its inventory. We have two ways to calculate inventory turnover ratio. One using the cost of goods sold (COGS) and the other using sales in numerator. Few analysts believe that COGS should be used in place of sales as the latter … [Read more...] about Inventory turnover ratio: How to calculate and what it tells you
Long & Short build-up, Long Unwinding and short covering – Explained
If you are in stock market for a while, and closely following financial news sites, then you might have come across list of stocks listed on these websites with following types of heading; Have you ever wondered why these financial sites give you this type of information? Well, now you will know why. In this article, we will explain what is long and short build-up, and … [Read more...] about Long & Short build-up, Long Unwinding and short covering – Explained
Accounts Payable turnover ratio: Calculation and what it tells you
Accounts payable turnover ratio is a measure to quantify the rate at which a company pays off its suppliers and short term debts. Accounts payable is listed on the balance sheet as a liability. It's a short term debt that the company owes to its creditors. Here is the formula to calculate accounts payable turnover ratio; Accounts payable turnover = Purchases / average … [Read more...] about Accounts Payable turnover ratio: Calculation and what it tells you
Working capital turnover ratio: How to calculate and what it tells you
We have many financial ratios to assess a company's efficiency in managing assets, liabilities and revenues in order to make profit. Working capital turnover ratio is one of such financial ratios. Working capital turnover ratio is calculated by using the following formula; Working capital turnover ratio = Net Annual Turnover or sales / average working capital Net … [Read more...] about Working capital turnover ratio: How to calculate and what it tells you
Why cash flow is more important than a company’s net profit
Company’s ability to generate positive cash flow is more important than profitability, because cash is needed to pay suppliers, employees and to take care of other expenses to continue as a going concern. A company that generates positive cash flow from its operating activities is at a better position than a company without positive cash flow. The company with positive cash … [Read more...] about Why cash flow is more important than a company’s net profit
Valuation ratios: How to know value of a stock or security
Equity analysts use valuation ratio to make investment decisions. The most popular and widely used indicator among those is the P/E ratio. P/E ratio stands for Price to earnings per share ratio. In other words, the P/E ratio expresses the relationship between the current market price per share and the amount of earnings attributable to a single share. The other two important … [Read more...] about Valuation ratios: How to know value of a stock or security
Understanding operating, financing and investing activities of the company
All listed companies are bound to report their cash flow statement while announcing their annual financial results. Cash flow statement is part of the financial statements that the company publishes every year. For financial reporting purposes, business activities are classified into three groups: operating, investing and financing activities in the cash flow … [Read more...] about Understanding operating, financing and investing activities of the company
Importance of liquidity ratios in financial analysis
In simple words liquidity means how quickly you can get your hands on cash. In other words, how quickly you can get your money whenever you need it. For a company, liquidity means how quickly a company's assets can be converted to cash when it's bought and sold, or whenever you need cash. To measure liquidity of a company or organisation, certain universal financial … [Read more...] about Importance of liquidity ratios in financial analysis
What is Mark To Market Losses and gains
Banks in India are mandated to mark their investments to prevailing market prices and charge the gains or losses to the profit and loss account, also known as mark to market gains or losses. You will also find mark to market concepts in future contracts. In this article, you will learn what is Mark to Market losses and Gains and how its used. Mark to market losses or … [Read more...] about What is Mark To Market Losses and gains
How to calculate asset turnover ratio
Asset turnover ratio (ATR) measures the company’s ability to generate sales or turnover relative to the value of assets. It is used as a financial indicator by analysts to take an investing decision. Higher asset turnover ratio indicates that the management is more efficient in generating revenue from its assets. In contrast, a low ATR indicates inefficiency of the … [Read more...] about How to calculate asset turnover ratio