What You Should Know About Glossary of 20 Numbers and Ratios

20 numbers and ratios to know

1. EBITDA

EBITDA stands for earnings before interest, taxes, depreciation, and amortisation. 

2. Profit before tax (PBT)

PBT is used to determine a company’s profit before the payment of corporate income tax. 

3. Profit after tax (PAT)

Profit after tax is the final profit that’s available after the company pays off all its expenses and taxes. 

4. Profit margin

Profit margin is the percentage of profit a company makes with respect to its revenue. 

5. Earnings per share (EPS)

Earnings per share is the revenue of a company expressed in terms of a single share held in the company. 

6. Price to earnings (P/E) ratio

The P/E ratio shows the price that you pay for every 1 rupee of revenue generated by the company. 

7. Dividend per share (DPS)

Dividend per share (DPS) is a metric that’s used to determine the amount of dividend you’re likely to get for every single share you hold in a company. 

8. Dividend yield

The dividend yield is expressed as a percentage and is used as an indicator of the return on your investment. 

9. Interest coverage ratio

This ratio essentially shows you how much revenue is generated for every rupee of debt interest payment made by a company. 

10. Current ratio

The current ratio is a useful indicator that’s used to determine a company’s ability to meet its current (short-term) liabilities with its current (short-term) assets.

11. Quick ratio

Also known as the acid test ratio, quick ratio is an indicator that determines a company’s ability to pay its short-term debts. 

12. Return on assets (ROA)

Return on assets is a ratio that shows the amount of profit earned by a company for every rupee invested in its assets. It is used to determine the effectiveness of the assets of a company when it comes to generating revenue. 

PAT is basically the net income.

13. Return on equity (ROE)

Return on equity shows you just how much of a profit a company generates for every rupee of equity invested in it. 

14. Return on capital employed (ROCE)

Return on capital employed is used to determine how much revenue a company generates with respect to the amount of capital employed by it. 

where, 

EBIT = earnings before interest and taxes, and 

Overall capital employed = total assets - current liabilities

15. Asset turnover ratio

The asset turnover ratio shows the amount of revenue earned by a company for every rupee invested in its assets.

16. Inventory turnover ratio

The inventory turnover ratio shows just how quickly a company is able to sell its inventory (stockpile of produced goods). 

17. Debt-equity ratio

This is widely used to determine the ratio of borrowed funds (debt) to that of funds contributed by the shareholders (equity) of a company. 

18. Debt to asset ratio

This ratio determines the proportion of debt to that of the assets of a company. 

19. Operating cash flow ratio

Operating cash flow ratio, generally calculated for a specific time period, helps determine the ability of a company to meet all its current (short-term) debts with the cash generated by the company through its operations. 

20. Average collection period

This ratio is used to determine the time period a company takes to collect payments owed by its debtors. Average collection period is always calculated for a specific period of time. 

Where, 

Accounts receivable turnover = revenue from sales ÷ average accounts receivables