Average collection period is a measure of how many days it takes a firm, on average, to collects its receivables. It indicates the efficiency of the collection process and the lower it is the shorter the cash cycle of the business is, which has a positive impact on its profitability. What is the Average Collection
Market Capitalization, or simply market cap, is a measure of how much a company’s current outstanding shares are worth. It is an estimation that employs the current price of a business’ shares to determine the total value of its equity instruments, including both common and preferred shares. What is Market Cap?Contents The market capitalization figure,
Break even analysis is an estimation that intends to find the particular number of units or the amount of revenues that need to be produced in order to achieve a profit of zero. The break-even point is achieved, therefore, when total revenues are equal to the sum of both variable and fixed costs. The volume
The Capital Asset Pricing Model (CAPM) is a mathematic formula that intends to determine the appropriate cost of equity to be employed to discount future cash flows, in order to estimate their present value. It combines different referential rates such as the risk-free rate and the overall market rate, along with risk indicators, to identify
Contribution margin is a measure that indicates how much a business earns on each of the product it sells, after deducting its variable costs. The contribution margin results from multiplying the price per unit by the number of units sold minus the variable cost per unit times the number of units sold. The resulting figure
The Dividend yield ratio is a financial ratio that indicates what percentage of the current price of a company’s shares is paid as dividends on a yearly basis. The dividend yield fluctuates, as the price of the shares fluctuate. It could also fluctuate due to changes in the company’s dividend distribution policy. What is a
Earnings per share (EPS) is a measure that calculates how much of a business’ net income can be attributed to each of its outstanding shares. It is a highly useful metric for shareholders, as it allows them to estimate how much they earned for each of the shares they hold. What is Earning Per Share?Contents
Present value is a formula that estimates the current value of a given amount of cash flow generated in a future date, considering that the value of money decreases as time passes. It is a concept widely employed in financial analysis to determine how much a future stream of cash would be worth today. What
Retained earnings, also called net assets, are the accumulated profits of a company that have not been distributed to shareholders in the form of dividends. After a company’s calendar or fiscal year ends, its income statement is issued and the net earnings (or losses) produced by the business are unveiled. The company now has two
A company’s working capital is understood as the result from subtracting current assets from current liabilities. As a metric, the Working Capital Ratio is also known as the current ratio and it calculates a company’s capacity to cover for its current liabilities with its current assets. Simply put, it is a liquidity measure that unveils