Financial ratios

Cost-to-Income Ratio Operating costs as a percentage of operating income; a bank-sector efficiency metric revealing how much of revenue is consumed by administrative and operational overhead.

Creditor Days Ratio Measures how long a company takes to pay suppliers, exposing payables management and working capital strategy.

Current Cash Debt Coverage Ratio A liquidity metric using operating cash flow to measure coverage of current liabilities, complementing traditional accrual-based working-capital ratios.

Current Ratio The current ratio divides current assets by current liabilities, measuring whether a company has enough liquid resources to pay its short-term obligations as they come due.

Current Ratio Below 1: What It Means and When It Is a Warning Sign A current ratio below 1.0 means short-term liabilities exceed current assets. Learn when this signals genuine distress and when it's normal by industry.

Current Ratio Benchmarks by Industry Current ratio by industry varies widely. Learn why retail and manufacturing have different liquidity targets than utilities and insurance.

Current Ratio vs Quick Ratio Current ratio and quick ratio both measure short-term liquidity, but quick ratio excludes inventory. Understand when each tells the full story about solvency.

Current Ratio vs Working Capital: What Is the Difference? Current ratio vs working capital difference explained: current ratio is a proportion, working capital is an absolute dollar amount. Both measure liquidity differently.

Cyclically Adjusted Price-to-Sales Ratio Cyclically adjusted price-to-sales ratio smooths revenue swings in cyclical industries to avoid buying overvalued stocks at peak earnings.

Days Cash on Hand: Formula, Calculation, and Benchmarks The days cash on hand formula measures how many days a business can operate on existing cash reserves. Learn calculation, interpretation, and industry benchmarks.

Days Cash Outstanding The average number of days a company takes to convert customer receivables into cash, measuring collection efficiency.

Days Inventory Outstanding Days inventory outstanding divides 365 by inventory turnover, expressing inventory as the number of days it sits before sale.

Days Payable Outstanding Days payable outstanding divides 365 by accounts payable turnover, expressing payables as the average number of days to pay suppliers.

Days Payable Outstanding and Liquidity Days payable outstanding measures how long a company takes to pay suppliers; stretching it improves short-term liquidity but signals cash stress or damages supplier relationships.

Days Payable Outstanding Too High: Risks and Trade-offs When days payable outstanding stretches too high, suppliers weaken and the company risks losing early-pay discounts and credit standing.

Days Sales in Inventory How long a company's current inventory would last at present cost-of-sales rates, measuring inventory turnover speed.

Days Sales Outstanding Days sales outstanding divides 365 by accounts receivable turnover, expressing receivables as the average number of days to collect payment.

Days Sales Outstanding as a Liquidity Indicator How rising days sales outstanding erodes short-term liquidity and cash flow even when reported profits remain stable, revealing a hidden drain on working capital.

Days Sales Outstanding Benchmarks by Industry Days sales outstanding benchmarks by industry: learn healthy DSO targets for manufacturing, software, healthcare, and retail to contextualize collection efficiency.

Days Sales Outstanding vs Days Payable Outstanding How DSO and DPO ratios compare to reveal whether a business finances growth or extracts cash through working capital timing.

Debt Ratio vs Debt-to-Equity Ratio: Key Differences Understand the distinction between debt ratio and debt-to-equity ratio. Both measure leverage, but measure it differently.

Debt Service Coverage Ratio A liquidity ratio comparing operating income to all debt service obligations, measuring a borrower's capacity to meet principal and interest payments.

Debt Service Coverage Ratio for Rental Property How mortgage lenders calculate DSCR on rental properties and the minimum thresholds required for approval and favorable terms.

Debt to Tangible Assets Ratio A leverage metric that measures outstanding debt against hard, collateralisable assets, excluding goodwill and intangibles.

Debt-to-Asset Ratio Explained The debt-to-asset ratio measures what share of a company's assets are financed by debt. Learn how to calculate it, interpret it, and compare it to leverage ratios.

Debt-to-Assets Ratio Debt-to-assets divides total debt by total assets, measuring what fraction of the company's assets are financed by debt versus equity.

Debt-to-Assets Ratio Benchmarks by Industry Debt-to-assets ratio by industry: sector benchmarks showing why utilities and airlines run high leverage while software firms stay lean.

Debt-to-Capital Ratio Debt-to-capital divides debt by total capital (debt plus equity), expressing debt as a percentage of total capitalization.

Debt-to-EBITDA Ratio Debt-to-EBITDA divides total debt by annual EBITDA, showing how many years of earnings it would take to pay off all debt.

Debt-to-EBITDA Ratio as a Loan Covenant Understand how lenders embed debt-to-EBITDA ratio loan covenants, what triggers default, and how borrowers negotiate maintenance versus incurrence tests.

Debt-to-EBITDA Ratio Benchmarks by Industry Compare typical debt-to-EBITDA ratios across industries to assess whether a company's leverage is normal, stretched, or conservative for its sector.

Debt-to-EBITDA Ratio for Real Estate Companies Why real estate firms carry higher debt-to-EBITDA multiples than other sectors and how to adjust the ratio for depreciation-heavy portfolios.

Debt-to-EBITDA Ratio for Small Businesses How small businesses should interpret debt-to-EBITDA ratio differently than large corporations, including realistic benchmarks and lender expectations for SMEs.

Debt-to-Equity Ratio The debt-to-equity ratio divides total debt by shareholder equity, measuring the balance between debt and equity financing. It shows financial leverage and risk.

Debt-to-Equity Ratio by Industry: What Is Normal? Why a healthy debt-to-equity ratio varies by sector and how to benchmark a company against peers rather than using a universal threshold.

Debt-to-Equity Ratio for Small Businesses Calculate and interpret debt-to-equity ratios for small business financing. Learn what lenders view as acceptable by industry and how D/E shifts as your company scales.

Debtor Days Ratio Tracks how long customers take to pay invoices, revealing collections efficiency and credit risk management.

Defensive Interval Ratio A liquidity metric that measures how many days of operating expenses a company can cover with its most liquid assets.

Defensive Interval Ratio: Step-by-Step Example The defensive interval ratio measures how many days a company can operate using only liquid assets to cover daily operating expenses. See a complete worked example using balance-sheet items.

Degree of Financial Leverage: Formula and Interpretation The degree of financial leverage formula shows how earnings per share responds to changes in operating profit. Worked example with calculation steps.

Delta (Option Greeks) The sensitivity of an option's price to changes in the underlying asset's price, expressed as a ratio between 0 and 1.

Dividend Per Share The total amount of cash paid by a company to shareholders per share held, usually annualized.

Dividend Yield The annual dividend paid by a stock divided by its current share price, expressed as a percentage.

Dividend Yield vs Earnings Yield: What Each Measures Understand the dividend yield vs earnings yield difference and why the gap between them reveals how companies allocate profits.

Dividend-Adjusted P/E Ratio The dividend-adjusted P/E ratio accounts for reinvested dividends to show the true earnings multiple paid by a long-term shareholder. Learn when this matters.

Down-Capture Ratio A fund's loss percentage during benchmark declines, compared to the benchmark's own decline—measuring how much downside protection the manager provides.

Downside Deviation: Calculation with an Example Downside deviation measures volatility of returns below a threshold, commonly used in the Sortino ratio. Learn the formula and calculation step-by-step.

DSCR (Debt Service Coverage Ratio) DSCR divides operating cash flow by total debt service (interest plus principal), measuring whether a company generates sufficient cash to service all debt obligations.

DuPont Analysis A framework that decomposes return on equity into profitability, efficiency, and leverage components to identify which drivers are improving or deteriorating.

DuPont Analysis: Breaking ROE Into Its Three Drivers How DuPont analysis decomposes return on equity into profit margin, asset turnover, and equity multiplier to diagnose profitability sources.

DuPont Asset Efficiency Component Asset turnover as the operational leg of the DuPont decomposition; isolates how efficiently a company deploys its balance sheet from how profitably it prices its sales.

Early Payment Discounts vs. Extended DPO: Which Is Better? Learn how to calculate the true cost of forgoing an early payment discount and compare it to holding cash longer with extended payment terms.

Earnings per share Earnings per share (EPS) is a company's net profit divided by its outstanding shares. It is the single most-watched metric on earnings day and a key input into stock valuation.

Earnings Quality A measure of how much of reported earnings represents genuine, sustainable cash profit versus one-time items, accounting gimmicks, or non-cash charges.

Earnings Yield Annual earnings per share divided by stock price, expressed as a percentage. The inverse of the P/E ratio.

EBIT Margin EBIT margin divides operating income by revenue, measuring profitability before interest and taxes.

EBIT Margin vs EBITDA Margin Comparing EBIT margin vs EBITDA margin: why the depreciation add-back flatters results, and which margin better reflects cash earnings in capital-intensive businesses.

EBIT to Sales Operating profit (EBIT) as a percentage of total revenue, revealing the percentage of each dollar of sales that remains as operating profit before interest and taxes.

EBITA Margin Earnings before interest, taxes, and amortisation as a percentage of revenue, isolating the core cash profitability of the business.

EBITDA Margin EBITDA margin divides EBITDA by revenue, measuring operating profitability before depreciation, amortization, interest, and taxes.