The Operating Leverage ratio explained. The Operating Leverage is a financial efficiency ratio not specifically a “profitability ratio”. The OL is a ratio used to measure how operating income is affected by how fixed & variable costs intertwine with sales volume. Operating leverage and profitability are positively related as profits are determined by the fixed… Continue reading
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Investing How to put the process of investing o work. Investing thread around everything investing, strategies, styles, formulas, valuations, history, anything to do with Investing we will discuss here.
What is the Gross Margin and how to use it?
The Gross Margin ratio explained. The Gross Margin (also known as Gross Profit Margin) is a “profitability ratio” that measures gross profit to sales revenue. It reflects the profits of a business after paying off its costs to produce its goods and services (COGS). The ratio is reflected as a percentage showing each dollar of… Continue reading
What is the ROA ratio and how to use it?
The Return on Assets ratio explained. The Return on Assets (ROA) is a “profitability ratio” used to measure how much profit it can generate from its assets. It shows how efficient a company is at earning profits from utilising its economic resources or assets on the balance sheet. The assets ratio is a great way… Continue reading
What is the ROC ratio and how to use it?
The Return on Capital ratio explained. The Return on Capital (ROC) is a “profitability ratio” used to measure the efficiency in which a business allocates its capital to generate profits. Return on capital is one of the best ratio’s that investors can use to determine whether a business will make a viable investment opportunity. The… Continue reading
What is the ROE ratio and how to use it?
The Return on Equity ratio explained. The Return on Equity (ROE) is a “profitability ratio” used to measure the profitability of a business in relation to its equity deployed. The ratio shows how efficient (or deficient) the company is at taking the equity investments of its shareholders and deploying that equity and generating income from… Continue reading
What is the Rule 72 and how to use it?
The Rule of 72 explained. The rule 72 is a simple way to determine how long an investment (your capital) will take to double given an annual rate of return. It is a great way to see the effects on your capital with a yield that is known whether it be from dividends, fixed bank… Continue reading
A simple way to Calculate Portfolio Returns.
Calculate Portfolio Returns explained. This is a simple formula to calculate portfolio returns. I prefer to use it annually however you can use the formula monthly measuring performance depending how active you are. There is a multitude of portfolio, investment, and financial management software available. In my personal experience, I still after 15 years… Continue reading
What is the Compound Annual Growth Rate?
The Compound Annual Growth Rate explained. The Compound Annual Growth Rate (CAGR) measures the average annual growth of an investment over a given period. CAGR is a helpful tool for investors because it measures investment growth (or decline) over time. This can be a useful way to measure against a benchmark if you have one…. Continue reading
What are some of the reasons people don’t invest?
There are quite a few very common reasons that people don’t invest into stocks (or many other asset classes). Some understandable, others circumstantial but all mostly behavioural. Before we get into investing, understanding why others avoid the markets can be helpful.
Continue readingWhat may be better than investing straight away and why?
I don’t think that everyone should simply jump in with both feet. Whilst investing can boast stable long-term returns, there is lower lying fruit to pick like better financial habits that can help build your wealth.
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