The variable cost ratio indicates the additional costs that arise when increasing production.
A relatively high ratio indicates that a company is more likely to turn a profit on relatively low sales volumes because it has a relatively high margin that can be applied to its fixed costs.
A relatively low ratio indicates that a company is less likely to turn a profit on relatively low sales volumes because it has a relatively low contribution margin that can be applied to its fixed costs.
Accounting ratios, an important subset of financial ratios, are a group of metrics used to measure a company’s performance and profitability based on its financial statements.
The acid test, or quick ratio, compares a company’s shortest-term assets to its shortest-term liabilities to see if the company has enough cash to pay off its immediate liabilities, such as short-term debt.
Activity Ratio broadly describes any type of financial measure that helps investors and analysts evaluate how effectively a company is using its assets to generate revenue and cash.
Performance Based Management (ABM) is a means of analyzing a company’s profitability by looking at every aspect of its business to determine its strengths and weaknesses.
Benefit Cost Ratio (BCR) is a measure showing the relationship between the relative costs and benefits of a proposed project, expressed in monetary or qualitative terms.
The CAPE ratio is used to analyze the long-term financial performance of a public company, taking into account the impact of various economic cycles on the company’s profit.
Capital expenditures are payments for goods or services that are recognized or capitalized on a company’s balance sheet, rather than expensed on the income statement.