EBIT/IE The ratio, also called the Interest Coverage Ratio, indicates the degree of coverage that the operating result can provide for the borrowing costs. This indicator is widely used by banks to monitor the financial risk of companies. The ability to meet interest payment obligations is absolutely critical to a company’s relationship with lenders. Because […]

The Equity to Assets ratio holds significant importance in evaluating the financial health and long-term profitability of a corporation. This metric is a staple for investors seeking insights into the safety of investing in a company’s shares, serving as a crucial indicator of solvency. This ratio assesses the degree of financial independence, offering a glimpse […]

The leverage ratio measures a company’s ability to utilize borrowed capital for asset acquisition. It expresses the relationship between borrowed capital and the company’s equity, providing an indication of the amount of debt used to support its activities. A higher result indicates a greater reliance on debt, enhancing potential returns on investments but also raising […]

It is a solvency measure, calculated over the entire life period of financial debt. It is given by the present value of Cash-flow Available for Debt Service (CFADS), increased by the cash reserve (if present) available to repay the financial debt and divided by the amount of debt owed by the company at a given time […]

The working capital to total assets ratio evaluates short-term solvency by comparing net liquid assets to the total assets of a company, serving as a critical financial metric. Working capital, the gap between current assets and liabilities, is pivotal in assessing a company’s capability to fulfill its immediate financial commitments. This ratio is a crucial […]

For assessing the profitability of a financial plan, the most used quantities are the NPV and the IRR. The Net Present Value (NPV) is defined as the present value of the sum of the discounted cash-flows throughout the duration of the financial plan. This indicator represents the wealth created through the project, updated to the date of […]

The quick ratio, also known as the acid-test ratio, is a financial metric that evaluates a company’s short-term solvency. Unlike the current ratio, the quick ratio excludes inventories from its calculation, focusing solely on cash and equivalents, as well as trade and other receivables. By doing so, it provides a more immediate assessment of a […]

* Profit (loss) attributable to the Owners of the Parent ** Equity attributable to the Owners of the Parent ROE measures the overall profitability of the Equity capital invested in the company and provides a benchmark to evaluate alternative investments. ROE indicates the return on capital invested by the shareholders or by the entrepreneur. In other words, […]

* (Total Assets-Current Liabilities); ROCE Very interesting to understand the evolution of the enterprise is the ROCE, a measure of the profitability of all capital invested (the loan capital as well). As a result, it represents the return obtained by all investors of the company. Investors often calculate ROCE based on ‘Average Capital Employed,’ which takes the average […]

The concept of financial leverage

ROE = ROI + (ROI – Cost of Debt) x (Debt/Equity)
where: Cost of Debt = Financial charges/Debt capital