Liquidity ratios determine how quickly a company can convert the assets and use them for meeting the dues that arise. The higher the ratio, the easier is the ability to clear the debts and avoid defaulting on payments.

Liquidity ratios

<ul><li class="ql-align-justify">Current Ratio = Current Assets/Current Liabilities</li></ul>Measures the ability of a company to pay off its short-term liabilities with its short-term assets.

Current Ratio:

<ul><li class="ql-align-justify">Quick Ratio = ( Current Assets−Inventory )/Current Liabilities</li></ul>Similar to the current ratio but excludes inventory, providing a more stringent test of liquidity.

Quick Ratio (Acid-Test Ratio)

<ul><li class="ql-align-justify">Cash Ratio=Cash and Cash Equivalents/Current Liabilities</li></ul>Evaluates the company's ability to pay off short-term liabilities with cash or near-cash securities.

Cash Ratio

financial metrics that measure how well a company uses its resources to generate income

Efficiency Ratios

<ul><li class="ql-align-justify">Inventory Turnover = Cost of Goods Sold/Average Inventory</li></ul>Indicates how many times a company's inventory is sold and replaced over a period.

Inventory Turnover

<ul><li class="ql-align-justify">Receivables Turnover</li></ul>= Net Credit Sales/Average Accounts ReceivableMeasures how effectively a company uses credit extended to customers.

Receivables Turnover

<ul><li class="ql-align-justify">Asset Turnover = Net Sales/Total Assets</li></ul>Shows how efficiently a company uses its assets to generate sales

Asset Turnover

<ul><li class="ql-align-justify">Gross Profit Margin=(Gross ProfitRevenue)×100</li></ul>Indicates the percentage of revenue remaining after accounting for the costs of goods sold.

Gross Profit Margin

<ul><li class="ql-align-justify">Operating Margin=(Operating Income/Revenue)×100</li></ul>Shows what proportion of revenue is left over after paying for variable costs of production like wages and raw materials.

Operating Margin

<ul><li class="ql-align-justify">Net Profit Margin=(Net Profit/Revenue)×100</li></ul>Measures how much profit the company makes for each dollar of sales

Net Profit Margin

<ul><li class="ql-align-justify">ROA=Net Income/Total Assets</li></ul>Indicates how profitable a company is relative to its total assets

Return on Assets (ROA)

<ul><li class="ql-align-justify">ROE=Net Income/Shareholder’s Equity</li></ul>Measures profitability by revealing how much profit a company generates with the money shareholders have invested.

Return on Equity (ROE)

<ul><li class="ql-align-justify">Debt to Equity Ratio=Total Liabilities/Shareholder’s Equity</li></ul>Shows the degree to which a company is financing its operations through debt versus wholly-owned funds.

Debt to Equity Ratio

<ul><li class="ql-align-justify">Interest Coverage Ratio=Earnings Before Interest and Taxes (EBIT)/Interest Expense</li></ul>Assesses how well a company can meet its interest obligations.

Interest Coverage Ratio

<ul><li class="ql-align-justify">P/E Ratio=Market Price per Share/Earnings per Share (EPS)</li></ul>Compares a company's current share price to its per-share earnings.

Price-to-Earnings (P/E) Ratio

<ul><li class="ql-align-justify">P/B Ratio=Market Price per Share/Book Value per Share</li></ul>Compares a stock's market value to its book value.

Price to Book (P/B) Ratio

<ul><li class="ql-align-justify">Dividend Yield=(Annual Dividends per Share/Price per Share)×100</li></ul>Shows how much a company pays out in dividends each year relative to its share price.

Dividend Yield

<ul><li class="ql-align-justify">Earnings Yield=Earnings per Share/Price per Share</li></ul>The inverse of the P/E ratio, it shows the percentage of each dollar invested in the stock that was earned by the company.

Earnings Yield

<ul><li class="ql-align-justify">P/S Ratio=Market Capitalization/Total Sales or Revenue</li></ul>Measures how much investors are willing to pay per dollar of sales.

Price to Sales (P/S) Ratio

<ul><li class="ql-align-justify">P/CF Ratio=Market Price per Share/Cash Flow per Share</li></ul>Compares the company's market value to its cash flow, giving insight into how much investors are willing to pay for the cash generated by the company

Price to Cash Flow (P/CF) Ratio

<ul><li class="ql-align-justify">EV/EBITDA=Enterprise Value/Earnings Before Interest, Taxes, Depreciation, and Amortization</li></ul>Useful for comparing firms with different capital structures by incorporating debt and cash levels.

Enterprise Value to EBITDA (EV/EBITDA) Ratio

<ul><li class="ql-align-justify">Earnings Growth Rate = (Earnings in Current Year - Earnings in Previous Year) / Earnings in Previous Year )* 100</li></ul>Measures the rate at which a company's earnings are increasing over time.

Earnings Growth Rate

<ul><li class="ql-align-justify">Revenue Growth Rate=(Revenue in Current Year−Revenue in Previous Year/Revenue in Previous Year)×100</li></ul>Indicates the growth in sales over a period.

Revenue Growth Rate

<ul><li class="ql-align-justify">PEG Ratio=P/E Ratio/Annual EPS Growth Rate</li></ul>This ratio modifies the P/E ratio by accounting for growth, providing a more nuanced view of stock valuation relative to earnings growth.

PEG Ratio (Price/Earnings to Growth Ratio)

<ul><li class="ql-align-justify">Operating Cash Flow Ratio=Operating Cash Flow/Current Liabilities</li></ul>Shows how well current liabilities are covered by the cash flow generated from operations.

Operating Cash Flow Ratio

<ul><li class="ql-align-justify">DSO={Accounts Receivable/Total Credit Sales }× Number of Days in Period</li></ul>Measures the average number of days it takes a company to collect payment after a sale has been made.

Days Sales Outstanding (DSO)

<ul><li class="ql-align-justify">DIO=[Average Inventory/Cost of Goods Sold] × Number of Days in Period</li></ul>Indicates how long it takes for inventory to turn into sales.

Days Inventory Outstanding (DIO)

DPO=[Accounts Payable/Cost of Goods Sold]×Number of Days in PeriodShows how long a company takes to pay its suppliers.

Days Payable Outstanding (DPO)

<ul><li class="ql-align-justify">Equity Multiplier = Total Assets/Shareholder’s Equity</li></ul>Indicates how much of the company's assets are financed by equity.

Equity Multiplier

<ul><li class="ql-align-justify">Debt Ratio = Total Liabilities/Total Assets</li></ul>Shows the proportion of a company's assets that are financed through debt.

Debt Ratio

TIE Ratio = EBIT/Interest ExpenseMeasures how many times a company can cover its interest charges on a pre-tax basis.

Times Interest Earned (TIE) Ratio

<ul><li class="ql-align-justify">Book Value per Share = Total Equity−Preferred Equity/Number of Common Shares Outstanding</li></ul>Represents the per-share value of a company's equity, essentially what shareholders would theoretically receive if the company liquidated.

Book Value per Share

<ul><li class="ql-align-justify">Tangible Book Value per Share=Total Equity−Intangible Assets−Preferred Equity/Number of Common Shares Outstanding</li></ul>Excludes intangible assets like patents or goodwill, giving a more conservative estimate of book value

Tangible Book Value per Share

Price to Tangible Book Ratio=Market Price per Share/Tangible Book Value per ShareCompares the market value of a company's shares to its tangible book value.

Price to Tangible Book Ratio

<ul><li class="ql-align-justify">ROCE=Earnings Before Interest and Tax (EBIT)/Capital Employed</li></ul>Where Capital Employed = Total Assets - Current Liabilities (or Total Equity + Total Debt). This ratio indicates how efficiently a company is using its capital to generate profits.

Return on Capital Employed (ROCE)

<ul><li class="ql-align-justify">ROIC=Net Operating Profit After Taxes (NOPAT)Invested Capital</li></ul>Invested Capital can be calculated as Total Debt + Total Equity. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business.

Return on Invested Capital (ROIC)

Return on Net Assets (RONA):RONA=Net Income/Fixed Assets + Working CapitalFocuses on the return generated from the company's net assets, excluding cash and investments

Return on Net Assets

Capital Turnover Ratio=Net Sales/Total Capital EmployedShows how effectively a company uses its capital to generate revenue.

Capital Turnover Ratio

EVA=Net Operating Profit After Tax (NOPAT)−(Capital Employed × Cost of Capital)Measures the true economic profit of a company by deducting the cost of capital from the net operating profit after taxes. It's not a ratio but an absolute measure of value creation

Economic Value Added (EVA)

ROACE = EBIT/Average Capital EmployedSimilar to ROCE but uses an average capital employed over a period, which can smooth out fluctuations in capital investment.

Return on Average Capital Employed (ROACE)

NAV per Share=Total Assets−Total Liabilities/Number of Shares OutstandingRepresents the per-share value of a fund's or REIT's assets after accounting for liabilities.

Net Asset Value (NAV) per Share for investment funds or real estate investment trusts)

Key Financial ratios 

<ul><li class="ql-align-justify">Supply: How much of a product or service is available to buy.        </li><li class="ql-align-justify">Demand: How much of that product or service people want to buy.          </li><li class="ql-align-justify">When supply is high but demand is low, prices go down. When demand is high but supply is low, prices go up   </li></ul>

Supply and demand

<ul><li class="ql-align-justify">This means there’s not enough resources (like time, money, or goods) to satisfy all the needs and wants. Scarcity forces us to make choices.</li></ul>

Scarcity

<ul><li class="ql-align-justify">The cost of the next best alternative you give up when you make a choice. If you spend $10 on a movie, the opportunity cost might be not buying a book with that money.</li></ul>

Opportunity Cost

<ul><li class="ql-align-justify">Total value of all final goods and services produced within a country's borders in a specific time period. It's a broad measure of a nation's overall economic activity.</li></ul>

GDP (Gross Domestic Product)

<ul><li class="ql-align-justify">The rate at which the general level of prices for goods and services is rising, eroding purchasing power. Imagine if a candy bar cost $1 last year but now it's $1.05; that's inflation.</li></ul>

Inflation

<ul><li class="ql-align-justify">The percentage of the labor force that is jobless. High unemployment means more people are looking for work than there are jobs available.</li></ul>

Unemployment

<ul><li class="ql-align-justify">Government decisions on spending and taxes to influence economic conditions. If the economy is slow, the government might spend more or cut taxes to stimulate it</li></ul>

Fiscal Policy

Managed by a country's central bank (like the Reserve Bank of India in your case), it involves controlling the money supply and interest rates to manage inflation and stabilize the economy

Monetary Policy

<ul><li class="ql-align-justify">Perfect Competition: Many small sellers, similar products, no control over price.</li><li class="ql-align-justify">Monopoly: One seller, high control over price.</li><li class="ql-align-justify">Oligopoly: Few sellers, products might be similar or differentiated, some price control.</li><li class="ql-align-justify">Monopolistic Competition: Many sellers, products are differentiated, some control over price.</li></ul>

Market Structures

<ul><li class="ql-align-justify">Measures how much the quantity demanded or supplied of a good responds to a change in price. If a small price increase causes a big drop in demand, that product has high demand elasticity.</li></ul>

Elasticity

<ul><li class="ql-align-justify">Planning how to spend your money, ensuring your expenses don't exceed your income.</li></ul>

Budgeting

<ul><li class="ql-align-justify">Savings: Money set aside for future use, often in a bank account.</li><li class="ql-align-justify">Investment: Putting money into assets like stocks, bonds, or real estate with the expectation of generating an income or profit.</li></ul>

Savings vs. Investment

<ul><li class="ql-align-justify">Borrowed money that needs to be paid back with interest. Managing debt wisely is crucial; good debt (like a mortgage) can build assets, while bad debt (like high-interest credit card debt) can drain finances</li></ul>

Debt

Spreading investments across various assets to reduce risk. Don't put all your eggs in one basket!

Diversification

Shares in a company. Owning stock means you own a piece of that company.

Stocks

Loans you give to entities (government or corporations) where they promise to pay you back with interest.

Bonds

The cost of borrowing money or the reward for saving. When banks charge you interest on a loan, that's the interest rate

Interest Rates

The value of one currency for the purpose of conversion to another. If INR to USD rate is 80, it means 1 USD equals 80 INR

Exchange Rates

Buying and selling goods and services across international borders. Countries with trade surpluses export more than they import, while those with deficits import more than they export

Trade

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Macroeconomics

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Microeconomics

Personal Finance

Financial Markets

Global Economics

Supply: How much of a product or service is available to buy.                Demand: How much of that product or service people want to buy.                   When supply is high but demand is low, prices go down. When demand is high but supply is low, prices go up         

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Productivity

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To avoid the topic and speak in a roundabout manner.You can use it when someone is avoiding talking about an important topic and trying to talk around it.

Beat Around the Bush

This idiom was coined to describe a rare or infrequent event.

Once in a Blue Moon

facing the consequences of your deeds

Face the Music

feel sick or unwell

under the weather

The term is used to describe something that happens suddenly and unexpectedly

a bolt from the blue

To end the conflict and make peace.

Bury the hatchet

a pointless or hopeless pursuit.

Wild goose chase

used to express for something thats costly or expensive

Cost an arm and a leg

used to point out something that's get done at the very last moment or almost too late.

At the eleventh hour

To brag about one's own achievements

Blow one's own trumpet

To remove the tension at a first meeting, at the opening of a party, etc.

Break the ice

To get into trouble or difficult situation

Get into hot water

To describe exactly what's causing a situation or problem

Hit the nail on the head

To have a grievance against someone or a personal reason for complaining or being involved in something

Have an axe to grind

To suspect that something is wrong or that someone is being dishonest.

Smell a rat

To stop working for the day or to stop doing something

call it a day

someone who is gifted by the ability to talk

Gift of the gab

The phrase is used to describe when someone agrees with another person or views something in the same way.

See eye to eye

To keep talking about something that's already been resolved or is no longer relevant or to waste effort on something that is unlikely to succeed

Flog/Beat a dead horse

To do something immediately, without any hesitation

At the drop of a hat

To do everything possible to achieve something

Leave No stone unturned

to accidentally reveal a secret

Let the cat out of the bag

To go out and enjoy something flamboyantly

Paint the town red

To reveal true character or intentions

Show your true colors

To reveal a secret

spill the beans

These are some most repeated idioms and phrases.. you can you these to improve your communication skills 

Key Financial ratios

Economics concepts

Idioms and phrases

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