Debt ratio is a financial ratio representing the ratio of external financing (total liabilities and provisions) to total assets and is used in the analysis of the capital structure. It determines the extent to which the company is funded by external financing and to which by its own capital. This financial indicator is very often […]

## Net Present Value Formula

Net Present Value (NPV) is a method of evaluation of economical effectiveness of investment. NPV is used to calculate the difference between the value of all present and future cash flows discounted to the present, both negative and positive, over the whole life of the investment. The NPV illustrates an important concept – that money […]

## Current Ratio Formula

The current ratio is one of the liquidity ratios which measures a company’s ability to pay its short term liabilities with its assets. This is a good way to measure overall liquidity as short-term liabilities are due within the next year, giving the company only a short amount of time to raise funds to pay […]

## Quick Ratio Formula

Quick ratio or acid test ratio is one of the liquidity ratios which measures a company’s ability to pay its short-term, current liabilities with its most liquid (or quick) assets. Quick assets are current assets which can be converted to cash quickly (within 90 days). Examples of quick assets include cash equivalents like treasury bills […]

## Weighted Average Formula

A weighted average is the average value of a set of numbers, with different levels of relevance. This relevance of each number is referred to as its weight, and is represented as a percentage of the total relevancy. All weights in a weighted average formula calculation should be equal to 100%, or 1. Where w […]

## Return on Equity Formula

What Is Return on Equity? Return on Equity (ROE) is a financial measure of profitability which illustrates how effectively a company manages Shareholders’ Equity and gets profit from it. By using Return on Equity investors can see if they’re getting a good return on their investments, while a company can evaluate if they’re using company’s […]

## Contribution Margin Formula

What is Contribution Margin? Contribution margin represents the incremental profit generated for each product/unit sold.It is a cost accounting calculation that tells a company the profitability of an individual product. The formula for contribution margin is the sale price of the item minus the variable costs. How to Calculate the Contribution Margin? On a per […]