Ratio analysis is a tool to analyze the financial performance of a business. It offers some advantages and disadvantages. Analysts must be aware of the potential limitations of ratio analysis. By understanding these limitations, analysts can make adjustments to evaluate the financial performance of a business that is closer to reality. What is Ratio Analysis? …
A lender of the last resort is the rescuer of troubled financial institutes, economies, or countries. It is the type of lender that is used as the last option by the borrower when all other options seem to dry up. Let us discuss what is the lender of last resort, how it works, and its …
The triple bottom line (TBL) or 3BL is a framework that aims to bring the people and planet aspects along with the conventional one of profit. The TBL theory suggests that businesses must adopt better social and economic policies that bring benefits in all three aspects rather than focusing on profits only. Let us discuss …
The current and quick ratios are good indicators of the short-term liquidity of a business. These ratios can also provide help in analyzing the long-term solvency as well. Both ratios use a similar form of current assets and current liabilities. However, the interpretation of both these ratios varies with some key differences. What is the …
Current Ratio vs Quick Ratio – What are the Key Differences? Read More »
What is a Quick Ratio? The quick ratio is the short-term liquidity test of a business. It is an accounting ratio that measures the ability of a business to pay current liabilities using cash and cash equivalents. The quick ratio considers assets that can be converted quickly into cash, hence the name quick ratio. The …
How to Calculate Quick Ratio? How It Can be Improved? Read More »
A nominal ledger is the primary source document for the accounting records of a business. It forms the basis of an accounting system in any business. Nominal ledger records all financial transactions categorizes them into different classes and provides useful information to the users. Let us discuss what is a nominal ledger, how it works, …
Goods received note (GRN) is a confirmation of the goods received from the seller. It is issued by the buyer with multiple copies. A GRN serves many purposes for the buyer, the shipping company, and the seller. Let us discuss what is a goods delivery note, how it is issued, and what are its advantages …
The economic value added (EVA) is a tool to measure the financial performance of an entity. It comes with several advantages as compared to the traditional profit-based metrics. Let us discuss what is EVA and its pros and cons as compared to other financial performance measurement tools. What is Economic Value Added (EVA)? Economic value …
The economic value added (EVA) is the value added by an entity by utilizing its capital resources. Unlike profitability, it considers both debt and equity sources of capital. Let us discuss what is EVA, its important components, and how it is calculated. What is Economic Value Added (EVA)? The economic value added (EVA) is the …
What is Economic Value Added (EVA) and How to Calculate It? Read More »
Net operating profit after tax (NOPAT) is an important profitability and efficiency metric. It tells us about the operational efficiency of a business. NOPAT can be used to analyze the impact of debt financing (leverage) on the profits of a business. Thus, it is a core measure of the profits generated through the operations of …
What is Net Operating Profit After Tax (NOPAT) and How to Calculate it? Read More »
