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Profitability index (PI), also known as profit investment ratio (PIR) and value investment ratio (VIR), is the ratio of payoff to investment of a proposed project.It is a useful tool for ranking projects because it allows you to quantify the amount of value created per unit of investment.
Liquidity ratios measure the availability of cash to pay debt. [3] Efficiency (activity) ratios measure how quickly a firm converts non-cash assets to cash assets. [4] Debt ratios measure the firm's ability to repay long-term debt. [5] Market ratios measure investor response to owning a company's stock and also the cost of issuing stock. [6]
The return on equity (ROE) is a measure of the profitability of a business in relation to its equity; [1] where: . ROE = Net Income / Average Shareholders' Equity [1] Thus, ROE is equal to a fiscal year's net income (after preferred stock dividends, before common stock dividends), divided by total equity (excluding preferred shares), expressed as a percentage.
There are four main categories of ratios: liquidity ratios, profitability ratios, activity ratios and leverage ratios. These are typically analyzed over time and across competitors in an industry. Liquidity ratios are used to determine how quickly a company can turn its assets into cash if it experiences financial difficulties or bankruptcy. It ...
The cyclically adjusted price-to-earnings ratio, commonly known as CAPE, [1] Shiller P/E, or P/E 10 ratio, [2] is a stock valuation measure usually applied to the US S&P 500 equity market. It is defined as price divided by the average of ten years of earnings ( moving average ), adjusted for inflation. [ 3 ]
The trading statement is an expanded version of sales portion of the Income statement. The trading statement's main objective is to determine sales, cost of sales and gross profit . [ 1 ] The trading statement it's part of effective book keeping within the accounting discipline .
In order to perform a profitability analysis, all costs of an organisation have to be allocated to output units by using intermediate allocation steps and drivers. This process is called costing. When the costs have been allocated, they can be deducted from the revenues per output unit. The remainder shows the unit margin of a product, client ...
The jaws ratio is a measure used in finance to demonstrate the extent to which a trading entity's income growth rate exceeds its expenses growth rate, measured as a percentage. A larger positive value demonstrates that a trading entity is effectively generating more income over time than it is generating expenses, thereby potentially increasing ...