Finance Formulas / July 16, 2018 / Chanel Cleveland
Total debt to total assets is a leverage ratio that defines the total amount of debt relative to assets. This metric enables comparisons of leverage to be made across different companies. The higher the ratio, the higher the degree of leverage (DoL) and, consequently, financial risk. The total debt to total assets is a broad ratio that includes long-term and short-term debt (borrowings maturing within one year), as well as all assets – tangible and intangible.
Economic profit is not recorded on a company’s financial statements nor is it required to be disclosed to regulators, investors or financial institutions. Meanwhile, accounting profit is a widely used performance measurement to indicate the overall financial success of an organization. Accounting profit measures the actual cash outlays and inflows, while economic profits incorporate a "what if" analysis. For this reason, an entity may report an accounting profit but realize an economic loss because resources could have been utilized better.
So how do you know if you’re spending the right amount? You need some numbers. First, you need to know how long the average customer sticks with you before they cancel their service. Because of course the longer a customer sticks with you, the more valuable they are.
Every business has assets, or things that the company owns and uses in its business in order to make money. These assets can include not just tangible items like cash, supplies, buildings, and equipment, but also intangible assets like trademarks and copyrights. The asset turnover ratio is a number that shows how much revenue is being earned for every dollar the company has spent on assets. It represents how well a company uses its assets to make money.
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