Total Expense Ratio TER Definition and How to Calculate

Total Expense Ratio TER Definition The Total Expense Ratio (TER) is a financial ratio that measures the total costs associated with managing and operating an investment fund. It is expressed as a percentage of the fund’s average net assets. The TER includes various expenses such as management fees, administrative fees, …

Total Debt to Capitalization Ratio Definition and Calculation

Total Debt to Capitalization Ratio Definition The total debt to capitalization ratio is a financial ratio that measures the proportion of a company’s total debt to its total capitalization. It provides insight into the company’s financial leverage and risk profile. This ratio is commonly used by investors, creditors, and analysts …

Times Interest Earned Ratio Calculation Guide

What is Times Interest Earned Ratio? Definition and Calculation The Times Interest Earned Ratio is calculated by dividing the company’s earnings before interest and taxes (EBIT) by its interest expense. The formula is as follows: Times Interest Earned Ratio = EBIT / Interest Expense EBIT represents the company’s operating income …

Time Value of Money: Formula and Examples

What is the Time Value of Money? This concept is based on the idea that money has a time component, and the value of money changes over time. The time value of money is influenced by factors such as inflation, interest rates, and the opportunity cost of investing or using …

Tier 1 Common Capital Ratio Meaning Overview Example

Tier 1 Common Capital Ratio: Meaning and Overview The Tier 1 Common Capital Ratio is a financial ratio that measures a bank’s core equity capital as a percentage of its risk-weighted assets. It is used to assess a bank’s financial strength and ability to absorb losses during times of economic …

Tier 1 Capital Ratio Definition and Formula for Calculation

Tier 1 Capital Ratio: Definition and Calculation Formula The Tier 1 Capital Ratio is a financial ratio that measures a bank’s core capital strength and its ability to absorb losses. It is an important metric for regulators, investors, and analysts to assess a bank’s financial health and stability. Tier 1 …

Texas Ratio Explained: The Meaning And Mechanics

What is the Texas Ratio? The Texas Ratio is a financial ratio that is used to assess the credit risk of banks and financial institutions. It is a measure of a bank’s ability to absorb potential losses from its non-performing loans and other troubled assets. The ratio is named after …

Stock Market Capitalization to GDP Ratio Definition and Formula

What is Stock Market Capitalization to GDP Ratio? The Stock Market Capitalization to GDP Ratio is a financial ratio that measures the size and significance of a country’s stock market in relation to its overall economy. It is calculated by dividing the total market capitalization of all listed companies in …

Standard Deviation Formula and Uses vs Variance

What is Standard Deviation? Standard deviation is a statistical measure that quantifies the amount of variation or dispersion in a set of data values. It provides valuable insights into the spread of data points around the mean or average value. In other words, it helps to understand how much individual …

Sampling: Types and Applications for Auditors and Marketers

Sampling: Types and Applications Sampling is a crucial technique used by auditors and marketers to gather data and make informed decisions. It involves selecting a subset of individuals or items from a larger population to represent the whole. There are various types of sampling methods that can be applied in …

Roy’s Safety-First Criterion SFRatio Definition and Calculation

What is Roy’s Safety-First Criterion SFRatio? Roy’s Safety-First Criterion SFRatio is a financial ratio that measures the risk-adjusted performance of an investment portfolio. It is named after its creator, William Roy, and is commonly used by investors and portfolio managers to evaluate the downside risk of a portfolio. The SFRatio …

Revenue Per Employee Definition and Factors That Affect It

What is Revenue Per Employee? Revenue per employee is a financial ratio that measures the amount of revenue generated by each employee in a company. It is calculated by dividing the total revenue of the company by the number of employees. This ratio provides insight into the productivity and efficiency …

Return on Risk-Adjusted Capital (RORAC) Formula & Example

Definition and Purpose The Return on Risk-Adjusted Capital (RORAC) is a financial ratio that is used to measure the profitability of an investment or business activity, taking into account the level of risk involved. It is a key performance indicator that helps investors and managers assess the efficiency and effectiveness …

Return on Revenue: How to Calculate and Apply It

Return on Revenue: How to Calculate and Apply It To calculate the Return on Revenue ratio, you need to divide the net income by the total revenue and multiply the result by 100 to express it as a percentage. The formula is as follows: ROR = (Net Income / Total …

Return On Invested Capital – The Formula, Calculation, And Example

What is Return on Invested Capital? Return on Invested Capital (ROIC) is a financial ratio that measures the profitability of a company’s investments. It is a key metric used by investors, analysts, and management to assess the efficiency and effectiveness of a company’s capital allocation. ROIC is calculated by dividing …

Return on Capital Employed ROCE Ratio Interpretation and Example

Definition and Calculation The Return on Capital Employed (ROCE) ratio is a financial metric that measures the profitability and efficiency of a company’s capital investments. It is a key indicator of how effectively a company is utilizing its capital to generate profits. The ROCE ratio is calculated by dividing a …

Return On Average Equity Definition and What It Indicates

Return On Average Equity Definition Return on Average Equity (ROAE) is a financial ratio that measures the profitability of a company in relation to its shareholders’ equity. It indicates how efficiently a company is utilizing its equity to generate profits. ROAE is calculated by dividing the net income of a …

Return on Average Capital Employed (ROACE) Definition & Formula

What is Return on Average Capital Employed (ROACE)? Return on Average Capital Employed (ROACE) is a financial ratio that measures the profitability and efficiency of a company’s capital investments. It is used to assess how effectively a company is using its capital to generate profits. ROACE is calculated by dividing …

Return on Average Assets (ROAA) Definition and How It’s Used

Return on Average Assets (ROAA) Definition Return on Average Assets (ROAA) is a financial ratio that measures a company’s profitability by evaluating its ability to generate earnings from its total assets. It is a key indicator of a company’s financial performance and is commonly used by investors, analysts, and lenders …

Return on Assets Formula and Good ROA Defined

Return on Assets Formula and Good ROA Defined Return on Assets (ROA) is a financial ratio that measures the profitability of a company in relation to its total assets. It indicates how efficiently a company is using its assets to generate profits. ROA is calculated by dividing the net income …

Receivables Turnover Ratio: Formula, Importance, Examples, Limitations

Receivables Turnover Ratio: Formula, Importance, Examples, Limitations The receivables turnover ratio is a financial ratio that measures how efficiently a company collects its accounts receivable. It is an important metric for assessing a company’s liquidity and its ability to manage its cash flow effectively. The formula for calculating the receivables …

Quick Ratio Formula – Examples, Pros and Cons

Quick Ratio Formula The formula for Quick Ratio is: Quick Ratio Formula = / Current Liabilities The Quick Ratio Formula provides a more conservative measure of a company’s liquidity compared to the Current Ratio. By excluding inventory, which may not be easily converted into cash, the Quick Ratio focuses on …

Q Ratio or Tobin’s Q: Definition, Formula, Uses, and Examples

Q Ratio or Tobin’s Q: Definition, Formula, Uses, and Examples Definition The Q Ratio is calculated by dividing the market value of a company’s assets by the replacement cost of those assets. It is used as an indicator of investment opportunities and market efficiency. Formula and Calculation The formula for …

Price-to-Sales Ratio: How to Calculate It

What is Price-to-Sales Ratio? The Price-to-Sales Ratio (P/S Ratio) is a financial metric used to evaluate the valuation of a company’s stock. It is calculated by dividing the market capitalization of a company by its total sales revenue over a specific period, usually the trailing twelve months. Definition and Calculation …

Price-To-Book Ratio: The Meaning, Formula, And Example

What is Price-to-Book Ratio? The Price-to-Book Ratio (P/B ratio) is a financial metric used to evaluate a company’s market value relative to its book value. It is a measure of how much investors are willing to pay for each dollar of a company’s net assets. The ratio is calculated by …

Price/Earnings-to-Growth Ratio Formula Explained

Exploring the Importance of Financial Ratios Financial ratios play a crucial role in analyzing the financial health and performance of a company. They provide valuable insights into various aspects of a company’s operations, profitability, and growth potential. One such important ratio is the Price/Earnings-to-Growth (PEG) ratio. The PEG ratio is …