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Articles on Trending Technologies
Technical articles with clear explanations and examples
What is Secure Access Service Edge (SASE) in Cybersecurity?
SASE recognizes a much-needed structure for granular networking that permits greater control of cloud service access after security into the cloud. Let's look at what this newly invented phrase means and how it's being used in the business.Supporting a rising number of remote employees securely is at the top of any company's priorities list. Even after the epidemic, studies suggest that many organizations will shift to having more home workers than office workers.Even yet, the reality of maintaining a secure, cost-effective, and efficient network has proven to be a constant problem. It has prompted some experts to propose the creation ...
Read MoreHow to Analyze Asset Turnover Ratio?
What is Asset Turnover Ratio?The assets turnover ratio explains the turnover of assets into sales. It is an efficiency ratio that implies a firm’s ability to generate sales from the assets. For this purpose, the net sales figure is compared with the total average assets.The total asset turnover ratio measures net sales as a percentage of assets to show how many sales are created from each rupee of assets.Example − An asset turnover ratio of 0.5 shows that each rupee of assets generates 50 paise of cash.How to Calculate Asset Turnover Ratio?The formula for calculating Asset Turnover is the following ...
Read MoreHow to Calculate Current Ratio?
What is Current Ratio?The correct way to measure the current ratio is to divide current assets by current liabilities.$$\mathrm{Current\: Ratio\:=\:\frac{Current\: Assets}{Current\: Liabilities}}$$Here, current assets include items that are short-term in nature. Both assets and liabilities in the current ratio are meant for items that exist within one year from the date of calculation. As the current ratio is a measure of the short-term solvency of a firm, items that are valid beyond one year are not considered in the calculation.Current AssetsCurrent assets in the calculation of the current ratio include cash and cash equivalents, and items that can be converted ...
Read MoreWhat is Quick Ratio in Finance and How to Calculate It?
What is a Quick Ratio?Cash is an indispensable resource for business firms as cash works as a fuel to run business operations successfully. Lack of cash may push a company to insolvency which is an inability to pay the current expenses. Long-term insolvency may push firms to bankruptcy. Therefore, knowing the position of a company in terms of available cash or liquidity is of utmost importance for the firm. Here’s where the quick ratio comes in handy.A quick ratio is an indicator of a firm’s ability to meet short-term expenses. In simple, it can be termed as the indicator of ...
Read MoreImportance of Leverage Ratio Calculation in Finance
Leverage ratios show the debt position of a company. Debt is an important part of finance for a firm. While debt is necessary to fund projects, excessive debt can be a sign of financial illness of a firm. In fact, both excess and too less availability of debt is detrimental for a firm.As debt ratios show relationships with other items, they can be an eye-opener for management, owners, and investors. An optimum level of debt not only shows the good financial health of a company, but also means that the company would grow in the near and long-term future without ...
Read MoreLiquidity Ratio: Definition, Uses, Types, and Importance
What is Liquidity Ratio?The ratio which measures the capability of a firm to meet its current obligation is known as liquidity ratio. This ratio derived its name from ‘liquidity’ referring to ‘the cash deposits available’.As a result, liquidity ratios are helpful in determining the firm’s ability to meet its short- and long-term liquidity needs. Liquidity ratios form a relationship between cash and other forms of assets to show the firm’s ability to meet its current obligations (current liabilities).Uses of Liquidity RatioLiquidity ratios are used to measure the liquidity position of a company. Usually, high equity is considered to be good ...
Read MoreWhat is Leverage Ratio in Finance?
What is Leverage Ratio?Creditors and lenders invest money in a firm looking for returns at different points in time. Short-term creditors, such as bankers and raw materials suppliers are usually more interested in the short-term liquidity of the firms they invest in. On the other hand, the long-time creditors, such as debenture holders and institutional investors look for the long-term health of a firm.In order to be termed healthy, therefore, a firm should be able to meet its short- as well as long-term obligations. To ascertain the long-term potential of a firm, financial leverage or capital restructure ratios are used. ...
Read MoreWhat is Pro-Forma Ratio Analysis in Financial Accounting?
Pro-Forma Ratio AnalysisPro-forma is a Latin word meaning ‘for the sake of form’. A Pro-forma analysis is a way to project the financials of a firm in a future period. In order to create Pro-forma analysis historical data is used as the base of accounting. Therefore, Pro-forma ratio analysis can be termed as a way of accounting that uses data from the past to forecast the results in the future.Sometimes, Pro-forma analysis is also used to omit the irregularities of accounting. For example, instead of projecting the future position, a Pro-forma report may show the performance of the company if ...
Read MoreDifference Between Cross-Sectional Analysis and Time Series Analysis
Although people consider cross-sectional and time-series analysis to be the same; however, they are totally different in many aspects.Based on Use and Nature of DataThe main difference between cross-sectional and time series analysis is in their use of data. Moreover, the data collected for time series and cross-sectional analysis are different in nature too.The difference between cross-sectional data and time-series data is that time-series data considers the same variables over a certain period of time, whereas cross-sectional data uses different data for a given point in time. It means that time-series data are stable, whereas the data used in the ...
Read MoreHow does Cross-Sectional Ratio Analysis Work?
What is Cross-Sectional Analysis?Cross-Sectional analysis is one of the handiest tools in comparing the performance of companies. Usually, companies within a given industry are tested with a chosen metric in cross-sectional analysis. It is not only correct, but it is also quite accurate in measuring the true financial potential of a company.Cross-sectional analysis is an analysis of specific data of a population or study of the pre-set subjects at a certain period of time. In finance, cross-sectional analysis is used to compare the performance of companies. The cross-sectional analysis offers insight into the performance of a company on a given ...
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