Finance Formulas / July 25, 2018 / Luz Tyson
This ratio measures the financial leverage of a company. Companies with higher levels of liabilities compared with assets are considered highly leveraged and more risky for lenders.
Typical bonds consist of semi-annual payments costing $25 per coupon. Coupons are usually described according to the coupon rate. The yield the coupon bond pays on the date of its issuance is called the coupon rate. The value of the coupon rate may change. Bonds with higher coupon rates are more attractive for investors since they provide higher yields. The coupon rate is calculated by taking the sum of all the coupons paid per year and dividing it with the bond's face value.
The asset turnover ratio is an efficiency ratio that measures a company’s ability to generate sales from its assets by comparing net sales with average total assets. In other words, this ratio shows how efficiently a company can use its assets to generate sales.
While the basic earnings-per-share formula only takes a company's outstanding common shares into account, the diluted earnings-per-share calculation takes all convertible securities into consideration. A company might have convertible preferred shares or stock options that could theoretically become common stock. If this were to happen, the result would be a reduction in earnings per share, and as such, a company's diluted earnings per share will always be lower than its basic earnings per share.
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