Finance Formulas / July 17, 2018 / Kenley Hopper
Total debt to total assets is a measure of the company's assets that are financed by debt, rather than equity. This leverage ratio shows how a company has grown and acquired its assets over time. Investors use the ratio to not only evaluate whether the company has enough funds to meet its current debt obligations, but to also assess whether the company can pay a return on their investment. Creditors use the ratio to see how much debt the company already has and if the company has the ability to repay its debt, which will determine whether additional loans will be extended to the firm.
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.
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