NATIONAL ACADEMY OF CERTIFIED MANAGEMENT CONSULTANTS MANAGEMENT CONSULTANTS ASSOCIATION GAFM
<< Previous    1...   32  33  [34]  35  36  ...199    Next >>

You’ve probably heard people banter around phrases like “P/E ratio,” “current ratio” and “operating margin.” But what do these terms mean and why don’t they show up on financial statements? Listed below are just some of the many ratios that investors calculate from information on financial statements and then use to evaluate a company. As a general rule, desirable ratios vary by industry.  

  • Debt-to-equity ratio compares a company’s total debt to shareholders’ equity. Both of these numbers can be found on a company’s balance sheet. To calculate debt-to-equity ratio, you divide a company’s total liabilities by its shareholder equity, or 

Debt-to-Equity Ratio = Total Liabilities / Shareholders’ Equity 

If a company has a debt-to-equity ratio of 2 to 1, it means that the company has two dollars of debt to every one dollar shareholders invest in the company. In other words, the company is taking on debt at twice the rate that its owners are investing in the company.  

  • Inventory turnover ratio compares a company’s cost of sales on its income statement with its average inventory balance for the period. To calculate the average inventory balance for the period, look at the inventory numbers listed on the balance sheet. Take the balance listed for the period of the report and add it to the balance listed for the previous comparable period, and then divide by two. (Remember that balance sheets are snapshots in time. So the inventory balance for the previous period is the beginning balance for the current period, and the inventory balance for the current period is the ending balance.) To calculate the inventory turnover ratio, you divide a company’s cost of sales (just below the net revenues on the income statement) by the average inventory for the period, or 

Inventory Turnover Ratio = Cost of Sales / Average Inventory for the Period 

If a company has an inventory turnover ratio of 2 to 1, it means that the company’s inventory turned over twice in the reporting period.  

  • Operating margin compares a company’s operating income to net revenues. Both of these numbers can be found on a company’s income statement. To calculate operating margin, you divide a company’s income from operations (before interest and income tax expenses) by its net revenues, or 

Operating Margin = Income from Operations / Net Revenues 

Operating margin is usually expressed as a percentage. It shows, for each dollar of sales, what percentage was profit.  

  • P/E ratio compares a company’s common stock price with its earnings per share. To calculate a company’s P/E ratio, you divide a company’s stock price by its earnings per share, or 
<< Previous    1...   32  33  [34]  35  36  ...199    Next >>
Our Board is now Internationally Accredited and  ISO 9001 Certified for Quality and ISO 21001 Certified for Training and ISO 29993 Certified Learning Services
     
EUAccredited  
 
Linkedin Certified Management Consultant
Join our Linkedin Global Group
 
Member Login Section

 
● Home
● About
● Certification
● Recognition
● Requirements
● Training
● Council
● Membership
● Ethics
● Mission National Academy of Management Consultants
● Benefits
● Accredited Education
● News
● Accredited Degrees
● Contact
● Application

Motto and Mission

"We now accept the fact that learning is a lifelong process of keeping abreast of change. And the most pressing task is to teach people how to learn."

-- Dr. Peter Drucker,  Austrian-born American management consultant, educator

 Master Certified Management Consultant Credential Designation Business Analyst Chartered

ISO29993 

Home Home Certifications AMC® Training Council Continuing Ed Awards Careers Board Government Jobs Membership Ethics Handbook Events Benefits Exam Sample Omicron Chi News Accredited Degrees Management Degrees Accounting Degrees Financial Analyst Degrees Human Resource Degrees Application Links Disclaimer

By GAFM ®

 The NAMC NATIONAL ACADEMY OF MANAGEMENT CONSULTANTS is a registered Nonprofit Association USA.
  All Rights Reserved 1996-2023 - IBS LLC  International Board of Standards - Accreditation and  Certification - Global Certified Political Analysts Institute
International Management Consulting Foregin Relations Public Policy Council - IMCB All Rights Reserved IBS LLC - 
 
certified managemnet consultant news

 

ShowIP/Disclaimer