The quick ratio, also known as the acid-test ratio, is a financial metric used to evaluate a company’s short-term liquidity and its ability to cover immediate financial obligations. It’s a more stringent measure of liquidity compared to the current ratio because it excludes certain less liquid assets from the calculation. Quick ratio formula Quick Ratio…
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The current ratio is a financial metric used to assess a company’s short-term liquidity and ability to cover its short-term obligations using its short-term assets. It’s a measure of a company’s ability to meet its short-term financial obligations, such as debts and upcoming expenses, with its short-term assets that can be easily converted into cash…
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The interest coverage ratio, also known as the times interest earned ratio, is a financial metric used to assess a company’s ability to meet its interest payment obligations on its debt. It indicates how well a company’s operating income can cover its interest expenses. In other words, it measures the company’s capacity to make interest…
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The debt-to-equity ratio is a financial metric that indicates the proportion of a company’s financing that comes from debt compared to the financing that comes from equity. It is commonly used to assess a company’s financial leverage or risk profile. Debt to equity formula The formula for calculating the debt-to-equity ratio is: Debt-to-Equity Ratio =…
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Enterprise Value (EV) is a financial metric used to assess the total value of a company, taking into account both its equity and debt components. It’s often used as a more comprehensive measure of a company’s worth compared to just looking at its market capitalization (market cap). EV provides a better picture of a company’s…
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EBIT, also known as operating income or operating profit, is a measure of a company’s profitability that focuses on its operating performance before considering the impact of interest expenses and income taxes. It is calculated by subtracting a company’s operating expenses (including cost of goods sold, selling and administrative expenses, and other operating costs) from…
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EBITDA is commonly used in financial analysis and valuation to assess a company’s ability to generate earnings from its core operations. EBITDA is an extension of EBIT that adds back non-cash expenses related to depreciation and amortization to the operating income. Depreciation is the allocation of the cost of tangible assets (like buildings and equipment)…
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Market capitalization, often referred to as “market cap,” is a financial metric that measures the total value of a company’s outstanding shares of stock in the open market. It is calculated by multiplying the current market price per share by the total number of outstanding shares. In other words, it represents the total dollar value…
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Ideally traders want to be long the highest % earnings growth stocks in the best sectors and short the lowest % growth stocks in the worst sectors. The price earnings ratio and earnings growth (EG) are the two most important factors to identify attractive stock to go long. Earnings growth is the most important factor…
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