What is the Asset Turnover Ratio? The asset turnover ratio, also known as the total asset turnover ratio, measures the efficiency with which a company uses its assets to produce sales. The asset turnover ratio formula is equal to net sales divided by the total or average assets of a company. A company with a high…
What is Return on Net Assets (RONA)? The return on net assets (RONA) ratio, a measure of financial performance, is an alternative metric to the traditional return on assets ratio. RONA measures how well a company’s fixed assets and net working capital perform in terms of generating net income. Return on net assets is commonly…
What is a Black Swan Event? A black swan event, a phrase commonly used in the world of finance, is an extremely negative event or occurrence that is impossibly difficult to predict. In other words, black swan events are events that are unexpected and unknowable. The term was popularized by former Wall Street trader Nassim…
What is Debt Restructuring? Debt restructuring is a process wherein a company or an entity experiencing financial distress and liquidity problems refinances its existing debt obligations in order to gain more flexibility in the short term and make their debt load more manageable overall. Reason for Debt Restructuring A company that is considering debt restructuring…
What is a Dividend Reinvestment Plan (DRIP)? A dividend reinvestment plan (DRIP or DRP) is a plan offered by a company to shareholders that it allows them to automatically reinvest their cash dividends in additional shares of the company on the dividend payment date. Dividend reinvestment plans are typically commission-free and offer a discount to…
What is the Statement of Retained Earnings? The statement of retained earnings provides an overview of the changes in a company’s retained earnings during a specific accounting cycle. It is structured as an equation, such that it opens with the retained earnings at the beginning of the reporting period, makes adjustments for items such as…
What is a Special Dividend? A special dividend, also referred to as an extra dividend, is a non-recurring, “one-time” dividend distributed by a company to its shareholders. It is separate from the regular cycle of dividends and is usually abnormally larger than a company’s typical dividend payment. Special dividends are typically declared after exceptionally strong…
What is Operating Return on Assets (OROA)? Operating return on assets (OROA), an efficiency or profitability ratio, is a variation of the traditional return on assets ratio. Operating return on assets is used to show a company’s operating income that is generated per dollar invested specifically in its assets that are used in its everyday…
What is Revenue Per Employee? Revenue per employee is an efficiency ratio used to determine the revenue generated per individual working at a company. The revenue per employee ratio is important for determining the efficiency and productivity of the average employee of a company. Formula for Revenue Per Employee The formula for the ratio is…
What is Recovery Rate? Recovery rate, commonly used in credit risk management, refers to the amount recovered when a loan defaults. In other words, the recovery rate is the amount, expressed as a percentage, recovered from a loan when the borrower is unable to settle the full outstanding amount. A higher rate is always desirable….
