Some of the most popular methods are computationally simple and can be applied by just about everyone. Understanding some of these tricks of the trade is important for analyzing companies you may be interested in investing in or for analyzing your own business. The base year is the earliest or the most recent year that […]

Combine all of these line items into a single metric called total expenses. Gross profit is a measure of absolute value, while gross margin is a ratio. Gross profit is simply the difference between a company’s sales and its direct selling costs, and a company’s gross margin is its gross profit expressed as a percentage […]

Other metrics that investors can use include return on investment (ROI), the quick ratio, the debt-to-equity (D/E) ratio, and earnings per share (EPS). Companies that experience surging FCF—due to revenue growth, efficiency improvements, cost reductions, share buybacks, dividend distributions, or debt elimination—can reward investors tomorrow. When a firm’s share price is low and free cash […]

This ratio is important because it provides insights into how efficiently a company manages and collects its receivables. A higher ratio indicates effective collection practices and better cash flow management. Average accounts receivables is the money from previous credit sales that the business has yet receive from customers. A ‘good’ accounts receivable (AR) turnover ratio […]

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