Posts Tagged → Financial Metrics

What is the best way to calculate the Risk-Free Rate and why is it important?

The Risk-Free Rate is a theoretical interest rate of return that carries zero risk. Although technically all investments carry some level of risk, investors want a way to measure the rate of return against other safer alternatives to ensure that the payoff to risk-reward is in their favour.

The Risk-Free Rate explained. The Risk-Free Rate is a theoretical interest rate of return that carries zero risk. Although technically all investments carry some level of risk, investors want a way to measure the rate of return against other safer alternatives to ensure that the payoff to risk-reward is in their favour. The Risk-Free rate… Continue reading →

What is the best way to measure inflation-adjusted return and why is it important?

The Inflation Adjusted Return, also known as the Real Rate of Return, is the Return on Investment after accounting for inflation. Inflation refers to purchasing power of money decreasing due to a general increase in the prices of goods and services.

The Inflation-Adjusted return explained. The Inflation Adjusted Return, also known as the Real Rate of Return, is the Return on Investment after accounting for inflation. Inflation refers to purchasing power of money decreasing due to a general increase in the prices of goods and services. The inflation-adjusted return is a precise measure of the true… Continue reading →

What is the Current Ratio and how to use it?

The Current Ratio (CR) is a “liquidity ratio” that measures a company’s ability to meet its short-term obligations. It is calculated by comparing the current assets to current liabilities. This ratio is used alongside the Quick Ratio to see the short-term obligations coming due within one year.

The Current Ratio explained. The Current Ratio (CR) is a “liquidity ratio” that measures a company’s ability to meet its short-term obligations. It is calculated by comparing the current assets to current liabilities. This ratio is used alongside the Quick Ratio to see the short-term obligations coming due within one year. The term “Current” refers… Continue reading →

What is the Debt-to-Equity ratio and how to use it?

The Debt-to-Equity ratio (D/E) is a “leverage ratio” that measures the weight of total debt and liabilities against total shareholder equity. A company’s financial leverage is an important metric to monitor as debt can make or sink companies.

The Debt-to-Equity Ratio explained. The Debt-to-Equity ratio (D/E) is a “leverage ratio” that measures the weight of total debt and liabilities against total shareholder equity. A company’s financial leverage is an important metric to monitor as debt can make or sink companies. It is an indirect way to assess the degree to which a company… Continue reading →

What is the Dividend Payout and how to use it?

The Dividend Payout Ratio (DPR) is a measure of the percentage of a company’s net income that is paid out to shareholders as dividends. When a company earns profits, it can either retain them to fund operations or distribute them among shareholders as dividends. The DPR is a crucial indicator of how much money a company pays out to investors, as this reduces the amount of cash it can use for expansion and growth.

The Dividend Payout Ratio explained. The Dividend Payout Ratio (DPR) is a measure of the percentage of a company’s net income that is paid out to shareholders as dividends. When a company earns profits, it can either retain them to fund operations or distribute them among shareholders as dividends. The DPR is a crucial indicator… Continue reading →

What is the Dividend Yield and how to use it?

The dividend yield (DY) is a financial ratio that measures the amount of cash that is paid out as a distribution to shareholders relative to the market value per share. A company earns profits, as shareholders we are entitled to a share of profits, and the dividend is our slice of that profit.

The Dividend Yield explained. The dividend yield (DY) is a financial ratio that measures the amount of cash that is paid out as a distribution to shareholders relative to the market value per share. A company earns profits, as shareholders we are entitled to a share of profits, and the dividend is our slice of… Continue reading →

What is the EPS and how to use it?

Earnings Per Share (EPS) is an important financial metric that determines how much of a company’s accounting profit is allocated to each common share outstanding. The earnings of a company is one of the most significant variables in shaping a stock price. The EPS in used in other key financial and valuation ratios.

The Earnings Per Share explained. Earnings Per Share (EPS) is an important financial metric that determines how much of a company’s accounting profit is allocated to each common share outstanding. The earnings of a company is one of the most significant variables in shaping a stock price. The EPS in used in other key financial… Continue reading →

This is what I look for when using multiples.

I have compiled a table of investment ratio multiples that I often use when looking for investment opportunities. The table includes the ratio, the multiple I aim at and what I look for, allowing for easy reflection of my investing approach. While my personal investment style focuses on GARP (Growth At Reasonable Prices), I still… Continue reading →