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Sortino Ratio
  Sortino ratio is a Financial ratio that is used to measure the performance of investment portfolio and is very similar to a Sharpe ratio. The main difference between Sortino ratio and Sharpe ratio is that Sharpe
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P/E Ratio
  P/E ratio is the most popular valuation multiple that is used for stock analysis. This ratio shows the price of the stock compared to its earnings. The multiple is so popular because of its simplicity and im
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Earnings
  Earnings are calculated gains of the company and should represent the profit of that business. There are several types of earnings:   Retained earnings are equal to net profit less dividends. Net earnin
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Income
  The term income may have several meanings. In corporate finance it basically means profit or earnings that are equal to revenue less expenses. But in some cases income may also indicate company’s revenue bu
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Gross Margin
  Gross margin is profitability percentage that shows the ratio between gross income and revenue. Gross margin is usually calculated when there is a need to compare company’s competiveness and effectiveness i
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Financial Analysis
  Financial analysis is an important part of investing, especially if investor wants better results from his investments. Of course it is possible to ignore financial analysis and make investment decisions based on
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Debt Coverage Ratio
  Debt coverage ratio (debt service coverage ratio) is a ratio that measures solvency risk and mostly is applied for property projects. There are many debt coverage ratios that are used in financial practice on thi
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Debt to Equity
  Debt to equity ratio (also known as D/E ratio, Debt/Equity) measures how big is company’s debt compared to its book capital (equity). The higher is the debt to equity ratio the higher is the insolvency risk
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Turnover Ratio
  (1) Turnover ratio of mutual fund shows how quickly assets of the fund are changing. Actively managed investment funds have higher turnover ratio than passively managed funds, and normally turnover ratio is measu
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Cash Coverage Ratio
  Cash coverage ratio measures company’s ability to repay its debts. It compares EBITDA (type of earnings) of the company and interest that is paid for company’s debts annually. EBITDA is not exactly eq
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Strategic Financial Planning
  Strategic financial planning is a bit different from standard financial planning because standard financial planning focuses on a budget which is detailed estimation of financial statements when strategic financi
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Return on Invested Capital
  Return on invested capital (ROIC) or also called return on capital is a Financial ratio employed to measure nominal company’s return that is earned by capital invested in operating asset. Basically return o
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Financial ratios
  Financial ratios are ratios that are used in financial analysis or in other words that are using financial data of a company. Such financial data usually is found in financial statements (income statement, balanc
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Fixed Asset Turnover
  Fixed asset turnover ratio is a Financial ratio that measures how much of sales are created by company’s property, plant and equipment. The ‘higher asset turnover’ is the better, because it mean
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Fundamental Analysis
  Fundamental analysis is the type of financial analysis that relies on company’s fundamentals. Those fundamentals depend on the target of the analysis. For example, fundamental analysis of stock depends on i
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Technical Analysis of Stocks
  Technical analysis of stocks is widely known type of stock analysis. Technical analysis is completely opposite to fundamental analysis. While fundamental analysis relies on company’s ability to generate cas
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Coverage Ratios
  Coverage ratios are Financial ratios that measure the ability of the company to repay its financial liabilities. Such ratios compare company’s operating income (or other type of income) or operating cash fl
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Receivables Turnover
  Receivables turnover ratio (also called as accounts receivable turnover) is a Financial ratio that measures how efficiently company collects its receivables. If receivables turnover is very low, it means company
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Average Collection Period
  Average collection period is a Financial ratio that is used to measure how fast company collects its receivables. ‘Average collection period’ shows what is the average time period till company gets ca
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Quick Ratio
  Quick ratio (also called ‘acid test ratio’) is a Financial ratio that measures company’s financial liquidity. This ratio compares company’s most liquid assets and short-term liabilities. I
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Capital Employed
  Capital employed is a value of capital investments in a company. Basically, the capital of each company can be classified in these types of capital: Equity capital  Debt capital Working capital  
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Current Ratio
  Current ratio is a Financial ratio that measures company’s financial liquidity in short term. In simple words, this ratio compares company’s short-term assets to its short term liabilities. If short-t
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Cash Ratio
  Cash ratio is a Financial ratio that measures company’s financial liquidity over short term. It compares company’s cash reserves to short-term liabilities. If ‘cash ratio’ is high, it may
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Equity Ratio
  Equity ratio is a Financial ratio that compares company’s equity to assets. Basically, it shows what part equity capital makes in total capital of a company. If ‘equity ratio’ is very high (clos
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Capital Adequacy Ratio
  Capital adequacy ratio is the main Financial ratio for banks to measure whether the bank has enough of capital on which depends the riskiness of the bank. Banks are borrowing money from other depositors and it is
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Net Interest Margin
Net interest margin shows the profitability of the lending business for a bank or other financial institution. Lending business is the core business for most of the banks, and the profitability of this operational segmen
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Cost/Income Ratio
  Cost/income ratio is very popular Financial ratio in bank analysis. This ratio measures the relation of bank’s operating costs to operating income. Basically, lower ratio is better because means higher prof
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Non-Performing Loan Ratio
  Non-performing loan ratio measures the quality of the loan portfolio of the financial institution. This Financial ratio compares non-performing loans to the total loan portfolio (loans are assets for the bank), a
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Loan to Deposit Ratio
Loan to deposit ratio is Financial ratio used for banks or other financial institutions. This ratio compares bank’s loan portfolio to deposit portfolio and measures financial liquidity of the institution.  &n
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Loans to Assets Ratio
  ‘Loans to assets ratio’ is a Financial ratio that usually is applied for banks (or credit unions) to measure the relation of the bank’s loan portfolio to the total assets.   Providing loa
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Reserve Ratio
  Reserve ratio (reserve requirement or cash reserve ratio) is a ratio that is used by central bank of an area to regulate the financial market. This Financial ratio compares the cash of the bank to the deposits th
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Cash Turnover Ratio
  Cash turnover ratio compares company’s sales to its cash and measures how effectively company is using cash assets. However, this Financial ratio now is a bit outworn and is not very meaningful for most of
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Total Debt Ratio
  Total debt ratio compares total liabilities to total assets. The higher ratio represents riskier situation. And if this ratio is equal to 1.0, it would mean that liabilities are equal to assets or in other words
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Book Value
  There are two main types of values that are used in finance: Book value  Market value   Book value is a value that is recorded in the balance sheet of a company. Every asset of the company must
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Leverage
Leverage definition In finance leverage means usage of debt capital in addition to the equity capital in order to increase the profit. Increase in leverage is understood as increase in riskiness and volatility.  
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