Understanding ROE & ROA, Limitations and Importance

Understanding ROE & ROA, Limitataions and Importance

Return on Equity (ROE) and Return on Assets (ROA) are two of the most widely used financial ratios in analyzing company performance. Both ratios are essential indicators of a company’s profitability, making them essential metrics for investment decision-making. While both ratios evaluate a company’s financial health, they calculate different aspects of profitability and can provide … Read more

Working Capital : Meaning, Formula, How To Calculate

Working Capital : Meaning, Formula, How To Calculate

Working capital is an essential component of business operations and has a significant role in determining a company’s success. In simple terms, working capital refers to the capital available with a company for its day-to-day operations. A company’s working capital is calculated by subtracting its current liabilities from its current assets. The importance of working … Read more

EBITDA Multiple : Why is it important? (Formula, Limitations, Use in Valuation)

EBITDA Multiple : Why is it important?

EBITDA Multiple for Corporate Valuation Valuating a company is no easy feat. There are various methods investors and analysts use to determine the worth of an enterprise or a business unit. One popular metric used in corporate valuation is EBITDA multiple. EBITDA stands for earnings before interest, taxes, depreciation, and amortization. It is an accounting … Read more

Understanding Working Capital : Components, Sales-to-Working Capital Ratio

Understanding Working Capital

Working capital is the amount of money that a business has available to carry out its operations on a day-to-day basis. It is a measure of a company’s liquidity that takes into account its current assets and liabilities. The term working capital is used to describe the funds required to cover a company’s short-term obligations … Read more

Understanding the Balance Sheet: Concepts of Assets, Liabilities, and Equities

Understanding the Balance Sheet

Understanding the Balance Sheet The balance sheet, also known as the statement of financial position, is a financial statement that presents a company’s financial position at a specific point in time. It displays the company’s assets, liabilities, and equity at a given moment, reflecting the company’s financial strength and ability to meet its obligations. Understanding … Read more

EBITDA vs EBIT: Which One Matters More?

When it comes to assessing the financial health of a company, investors and analysts often look at various metrics. Two popular metrics are EBITDA and EBIT. EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization, while EBIT stands for Earnings Before Interest and Taxes. While both are important measures of a company’s profitability, understanding … Read more

Understanding Contingent Liability A brief introduction to potential liability

Understanding Contingent Liability A brief introduction to potential liability

Contingent Liability Introduction: Understanding Potential Responsibility Contingent liability is a term used in accounting and finance to describe a potential cost or obligation that may or may not arise depending on the outcome of a future event. It’s something that a company or individual may not have to pay, but they have a potential liability … Read more

Enterprise Value vs. Equity Value: Differences, Formula and Definition

Enterprise Value vs Equity Value

In the world of finance and accounting, two essential concepts that often get confused are Enterprise value and Equtiy value. It is crucial to understand the difference between the two and their respective calculation methods. Enterprise value represents the total value of a business, while equity value is simply the value of the company’s equity. … Read more