Finance Formulas / July 19, 2018 / Briana Leonard
Customer lifetime value can also be defined as the monetary value of a customer relationship, based on the present value of the projected future cash flows from the customer relationship. Customer lifetime value is an important concept in that it encourages firms to shift their focus from quarterly profits to the long-term health of their customer relationships. Customer lifetime value is an important number because it represents an upper limit on spending to acquire new customers. For this reason it is an important element in calculating payback of advertising spent in marketing mix modeling.
The personal debtequity ratio is often used in financing, as when an individual or small business is applying for a loan. This form of DE essentially measures the dollar amount of debt an individual has for each dollar of equity they have. DE is very important to a lender when considering a candidate for a loan, as it can greatly contribute to the lender’s confidence (or lack thereof) in the candidate’s financial stability.
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