Which is better: A high or low equity multiplier?

July 9, 2024 No Comments

A: An equity multiplier measures a company’s financial leverage by using a ratio of the company’s total assets to its stockholders’ equity. Generally, a lower equity multiplier indicates a company has lower financial leverage. It is better to have a low equity multiplier, because a

Which metric should I pay more attention to, EV/EBITDA or P/E?

July 9, 2024 No Comments

A: The price-to-earnings (P/E) ratio is one of the most popular and widely used financial metrics, but it has a number of inherent flaws for which the enterprise value to EBITDA (EV/EBITDA) ratio compensates. The EV/EBITDA ratio is a financial metric that measures the return

Which types of industries have the largest capital expenditures?

July 9, 2024 No Comments

A: Capital expenditures are major purchases, such as facilities and equipment, that companies make to maintain or expand their business. Because such purchases involve acquiring assets that provide value and usefulness for a company for a period of several years, companies recover the cost of

Who actually declares a dividend?

July 9, 2024 No Comments

A: It is a company’s board of directors who actually declares a dividend. The declaration date is the first of four important dates in the process of a company paying a dividend. How a Company Handles Paying a Dividend Before a cash dividend is declared

Why are capital expenses (CAPEX) treated differently than current expenses?

July 9, 2024 No Comments

A: Current expenses are the necessary purchases that keep your business going from day to day such as rent, utility bills and office supplies. They are short-term purchases, or those used for less than one year, with no long-term effect on the profitability of a

Why are efficiency ratios important to investors?

July 9, 2024 No Comments

A: When analyzing a company’s potential for investment, it is important to examine its financial performance from every angle. While metrics that measure a company’s ability to turn profit are of paramount importance, the efficiency with which they do so also bears scrutiny. A company

Why can additional paid in capital never have a negative balance?

July 9, 2024 No Comments

A: The additional paid-in capital figure on a company’s balance sheet can never be negative because companies do not pay investors to take shares of stock off their hands. Equity Capital and Paid-In Capital When a business needs funds to finance growth, it can do

Why do accountants use debits and credits instead of simple pluses and minuses? Why is the notation for a debit “DR”?

July 9, 2024 No Comments

A: Debits and credits, and the technique of double-entry accounting, are credited (no pun intended) to a Franciscan monk by the name of Luca Pacioli. Known as the “Father of Accounting”, he warned that you should not go to sleep until your debits equaled your

When is an expense ratio considered high and when is it considered low?

July 9, 2024 No Comments

A: A number of factors determine when an expense ratio is relatively high or low, but a good, low expense ratio is generally considered to be around 0.5-0.75% for an actively managed portfolio, while an expense ratio greater than 1.5% is considered on the high

When is earnings season?

July 9, 2024 No Comments

A: Earnings season is the period of time during which a large number of publicly traded companies release their quarterly earning reports. In general, each earnings season begins one or two weeks after the last month of each quarter (December, March, June and September). In

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