Categories » Calculator Corner
Jensen’s measure is an important tool for treasurers who want to achieve the best possible return on any investment.
Be the first to comment | May 2013
A measure of the total value of a company’s outstanding shares according to the stock market, market capitalisation is often referred to simply as ‘market cap’ or ‘capitalised value’.
Be the first to comment | March 2013
One of the key performance indicators (KPIs) used by investors to evaluate the performance of a particular company is the net profit margin. The formula shows how much of a company’s sales result in profit and how much is lost through, for example, depreciation or tax. Additionally, the calculation can also provide companies with the information needed for determining the effectiveness of cost control measures within their organisation. A comparatively high profit margin can be very advantageous for a business, by providing a cushion to protect the company when markets contract. Equally, a company with a relatively low net profit margin may well be faced with a higher than average risk in the event of a downturn.
Be the first to comment | January 2013
Companies use the asset coverage ratio to measure their ability to cover their debt. When a company has a high ratio this indicates that the company is likely to be able to keep operating with current debt and asset levels, whereas a low ratio – for example see below – makes this less likely.
Be the first to comment | November 2012
The working ratio is used to determine whether or not a company is able to recover its operating costs from its annual revenue.
Be the first to comment | July 2012
The cash conversion cycle (CCC) is the length of time, averaged in terms of days, which it takes for a company to convert expenditure on raw materials and other production costs into receipts of cash through the sale of its goods and services. It offers an indication of a business’s operational efficiency and liquidity.
Be the first to comment | April 2012
The Enterprise Value Multiple (EVM) is a ratio that determines the value of a company. It is considered to offer a more comprehensive indication of a company’s worth than the P/E ratio because it takes the company’s debt level into account.
Be the first to comment | March 2012
Regression analysis, sometimes referred to simply as ‘regression’, is a statistical tool used to analyse the relationship between two or more variables. It is employed in many areas of forecasting and financial analysis because it can help analysts understand how strongly a set of ‘independent’, that is to say changing, variables are related to a ‘dependent’ one.
Be the first to comment | October 2011
WACC is useful because it is based on rates of return that are determined by the market or observable from published data. This objectivity means that it is a valuable measure of how well a company is creating shareholder value and what its current value is. Internally, it is a crucial variable in assessing the viability of new investments and acquisitions.
Be the first to comment | July 2011
The net present value (NPV) of an asset is the sum total of the present values (PV) of that asset over a given period of time. It is used in the field of discounted cash flow analysis and allows an investor to calculate the likely returns on a prospective investment over its lifetime.
Be the first to comment | June 2011