What is Enterprise Value to Sales Ratio? Enterprise Value to Sales Ratio (EV/Sales) is a financial metric that investors use to measure a company’s total value in relation to its sales. The first part of the ratio is the Enterprise Value. A company’s enterprise value is the sum of its …

What is Free Cash Flow to Equity? Free Cash Flow to Equity (FCFE) represents the cash available to a company’s shareholders or investors. These are the cash flows that come after deducting all the expenses, reinvestment, and debt expenses from a company’s total cash inflows. FCFE is a crucial metric …

What is Free Cash Flow? Free Cash Flow (FCF) represents any cash that a company or business has left after paying for its operational needs and maintaining capital assets. Operating expenses include items, such as rent, salaries, and wages, taxes, etc., that companies pay to continue their activities. Similarly, capital …

What is Free Cash Flow to the Firm? Free Cash Flow to the Firm (FCFF) represents any cash remaining after deducting a company’s depreciation, taxes, working capital, and other investment costs from its revenues. This amount shows any cash flow available for companies to distribute to their financiers, whether debtholders, …

Most economies experience inflation regularly. Inflation represents a specific currency’s purchasing power. A high increase in inflation can result in damage to most economies. Some economies may also experience negative inflation, also known as deflation. While, theoretically, it can be a good thing, it also has some drawbacks. What is …

There are several ratios that investors may use to gauge a company’s profitability and performance. Some of these may focus on the company’s profitability only. However, some others also help investors measure the company’s performance and efficiency. Among those, one of the most prominent ratios is the Return on Capital …

Investors can use various profitability ratios to evaluate whether they should invest in a company. Some of these ratios are basic and allow investors to determine whether the company is profitable. However, investors may also want to know the returns they will get on their invested amounts. For these calculations, …

Inflation refers to the decrease in a currency’s purchasing power. It can come as a result of various factors. Inflation isn’t necessarily a bad thing, as it can also accompany positive changes. However, it usually has adverse effects on businesses and individuals. Inflation risk, also known as purchasing power risk, …

The Capital Asset Pricing Model (CAPM) is a model that describes the relationship between systematic risk and anticipated returns. It is a model commonly used by companies to calculate their cost of capital. They may also use some other models. However, CAPM considers the systematic risk of investments, making it …

What does Due Diligence mean? Due diligence is the process of investigating, reviewing, and auditing that companies and businesses perform. Usually, they do so to confirm facts relevant to a financial transaction. For example, companies may perform due diligence before acquiring another company. They may do so to verify whether …