• Finance , Higher Level Management ,
• 15 Dec

Cash Conversion Ratio (CCR) is a liquidity measure that compares the cash generated by a company compared to accounting profit in a given period. You may also hear this metric called the Cash Conversion Rate. It is often used in manufacturing type industries.  We can understand the financial health of a company using CCR. This

• Finance ,
• 14 Nov

Cash value added (CVA) determines the residual cash generated in excess of the required cash flow return on investment (CFROI). It is the cash version of Economic Value Added (EVA) and was created by the Boston Consulting Group. The Boston Consulting Group considers this a further evolution of the EVA while still acknowledging it’s own

• Finance , Tips and Tricks ,
• 07 Nov

Setting financial goals and practicing discipline to achieve those goals is essential for the future of you and your loved ones. Whether you’re wanting to start a college fund for your child, put more money away for retirement, pay off a chunk of your credit card debt, or save more money in general, you will

• Finance ,
• 12 Oct

We use Price-to-Research Ratio to compare the R&D spending to the company’s market value. In this way we can compare companies that are different sizes. The idea is that the more they spend on R&D in relation to their market value, it signals a greater effort towards innovation and will hopefully continue to create long

• Corporate Strategy , Economics , Finance , Higher Level Management ,
• 26 Sep

Economic Value Added (EVA) is a profit metric. It was created by the consulting firm Stern Value Management. The big difference between EVA and regular profit is that EVA takes into account the cost of capital. It shows the amount of economic value added with a positive value or destroyed with a negative value. This

• Accounting , Finance ,
• 17 Aug

Variable Costing is used in internal Managerial Accounting, Cost Accounting and Finance to help make decisions. It is a part of calculating the Contribution Margin and Break-Even Analysis.  It is similar to absorption costing except that we leave out fixed manufacturing overhead. GAAP and IFRS do not allow Variable Costing in external reporting. The main

• Accounting , Economics , Finance ,
• 09 Aug

Calculating Foreign Exchange gains and losses is important for companies that do business internationally. We won’t get into complicated Forex trading but look at how exchange rates changing over time can affect your accounts receivable and accounts payable. We’ll also define basis points and work them into our discussion. Why do we have gains or

• Economics , Finance , Higher Level Management ,
• 14 Jul

Payback Period is a “quick and dirty” method of calculating how long it will take to recoup an investment given the assumption or knowledge of future cash in-flows. You essentially have two pieces to this equation, the money you invested and the cash flows that come in each year. If it’s consistent cash flows coming

• Accounting , Finance , Metrics and Ratios ,
• 13 Jul

Contribution margin in it’s simplest form is total sales minus total variable costs but it can also be expressed as a ratio. This margin is what is left over to pay fixed costs and for capital. This is different than Gross Margin in that GM uses COGS instead of variable costs. COGS does not equal

• Economics , Finance , Metrics and Ratios ,
• 07 Jul

The Treynor Ratio is a reward to volatility metric. It is named after the economist Jack Treynor. It’s a performance measure that determines the additional return generated for each unit of  systemic risk in a portfolio. Treynor Ratio     where Portfolio Return Risk-Free Rate Beta of the Portfolio     Portfolio Return This is