What is Inventory Turnover? Inventory turnover, or the inventory turnover ratio, is the number of times a business sells and replaces its stock of goods during a given period. It considers the cost of goods sold, relative to its average inventory for a year or for any set period of time. A high inventory turnover generally means…
What is a Divestiture? A divestiture (or divestment) is the disposal of company’s assets or a business unit through a sale, exchange, closure, or bankruptcy. A partial or full disposal can happen, depending on the reason why management opted to sell or liquidate its business’ resources. Examples of divestitures include selling intellectual property rights, corporate…
What Is a Corporation in Business? A corporation is a legal entity created by individuals, stockholders, or shareholders, with the purpose of operating a business for profit. A corporation, by definition, exists as a separate legal structure from its owners and is recognized under state laws. This separation provides limited liability protection, meaning the corporation…
What is Amalgamation? In corporate finance, an amalgamation is the combination of two or more companies into a larger single company. In accounting, an amalgamation, or consolidation, refers to the combination of financial statements. For example, a group of companies reports their financials on a consolidated basis, which includes the individual statements of several smaller…
What is a Stock? When a person owns stock in a company, the individual is called a shareholder and is eligible to claim part of the company’s residual assets and earnings (should the company ever have to dissolve). A shareholder may also be referred to as a stockholder. The terms “stock,” “shares,” and “equity” are…
What is the Sharpe Ratio? Named after American economist William Sharpe, the Sharpe Ratio (also called the Sharpe Index or the Modified Sharpe Ratio) is commonly used to gauge the performance of an investment by adjusting for its risk. The higher the ratio, the greater the investment return relative to the amount of risk taken,…
What is ROAS? ROAS stands for “Return on Ad Spend,” a very popular financial metric in the world of digital marketing in particular, and a similar alternative metric to ROI, or “Return on Investment.” ROAS is commonly used in eCommerce businesses to evaluate the effectiveness of a marketing campaign. It should be noted that having a…
What is Risk Averse? Someone who is risk averse has the characteristic or trait of preferring avoiding loss over making a gain. This characteristic is usually attached to investors or market participants who prefer investments with lower returns and relatively known risks over investments with potentially higher returns but also with higher uncertainty and more…
What is a Negative Correlation? A negative correlation is a relationship between two variables that move in opposite directions. In other words, when variable A increases, variable B decreases. A negative correlation is also known as an inverse correlation. Two variables can have varying strengths of negative correlation. The variable A could be strongly negatively…
What is LTM (Last Twelve Months)? LTM (Last Twelve Months), also known as the trailing or rolling twelve months, is a time frame frequently used in connection with financial ratios, such as revenues or return on equity (ROE), to evaluate a company’s performance over the immediately preceding 12-month period. This is not necessarily related to a fiscal year period, as the…
