Because net income is earned over a period of time and shareholders’ equity is a balance sheet account often reporting on a single specific period, an analyst should take an average equity balance. This is often done by taking the average between the beginning balance and ending balance of equity. Net income over the last […]

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Many growth-oriented investors prefer profits to be reinvested or used for buybacks. This is because investors gain from prices that are not taxed until after the sales of the shares, while dividends are taxed in the year they are received. The importance will be further elaborated upon in the latter part of this article. Payout […]

Simply put, the TIE ratio—or “interest coverage ratio”—is a method to analyze the credit risk of a borrower. Startup firms and businesses that have inconsistent earnings, on the other hand, raise most or all of the capital they use by issuing stock. Once a company establishes a track record of producing reliable earnings, it may […]

This ratio relates the costs in inventory to the cost of the goods sold. A formal written promise to pay interest every six months and the principal amount at maturity. A formal, written promise to pay interest and to repay the principal amount. A balance on the right side (credit side) of an account in […]