DuPont Analysis, Explained: Splitting ROE Into Margin, Turnover, and Leverage
DuPont analysis splits ROE into profit margin × asset turnover × leverage — so a rising return you cannot trace to operations reads as borrowed, not earned.
#financial-ratios
Financial Ratios
Key financial ratios like ROA, ROE, and profitability metrics for measuring business performance
Market Cap vs. Enterprise Value: Why Share Price Times Shares Outstanding Misses Debt and Cash
Enterprise value adds debt and subtracts cash from market cap, giving the theoretical takeover price buyers actually negotiate from.
Basic vs. Diluted EPS, Explained: What Each Share of Earnings Is Really Worth After Options, Warrants, and Convertible Debt
Diluted EPS assumes every option, warrant, and convertible note becomes shares; it is the worst-case number — value the company on it, not on basic EPS.
Callable Debt and Covenant Violations, Explained: When Your Long-Term Loan Lands in Current Liabilities
A covenant breach at the balance sheet date makes long-term debt callable — and callable means current, even if the lender never demands payment.
Cumulative Preferred Stock and Dividends in Arrears, Explained: How Missed Dividends Pile Up, Why Arrears Must Clear Before Common Holders See a Dollar, and Why They Stay a Footnote Until the Board Declares
Skipped cumulative preferred dividends stack up as arrears that must clear before common holders see a dollar — yet stay a footnote until declared.
Financial Leverage, Explained: How Debt Magnifies Your Returns and Your Losses
The degree of financial leverage equals EBIT divided by EBT: a DFL of 2 turns a 10% operating dip into a 20% earnings fall.
Profitability Index, Explained: How to Rank Capital Projects by Present Value per Dollar Invested
Profitability index is the present value of inflows over the initial investment — fund projects above 1.0, highest PI first when the budget is capped.
Free Cash Flow, Explained: How to Calculate FCF From Operating Cash Flow Minus CapEx — and Why a Profitable Business Can Still Run Out of Cash
Free cash flow is operating cash flow minus CapEx — the cash left after maintaining your assets. How to calculate it, read it, and fix it.
Same-Store Sales and Sales per Square Foot, Explained: The Two Retail KPIs That Separate Real Growth From New-Store Openings
Same-store sales strip new locations out of retail growth; sales per square foot tests whether each store earns its rent. Formulas and benchmarks.
Cash Ratio Explained: The Strictest Liquidity Test Your Balance Sheet Can Pass
Cash ratio equals cash and equivalents divided by current liabilities; 0.5-1.0 is the healthy zone for most small businesses.
What Is a Classified Balance Sheet? Current vs. Non-Current Sections, What Each Subtotal Tells a Lender, and How to Build One From Your Trial Balance
A classified balance sheet sorts assets and liabilities into current and non-current sections — the subtotals behind working capital and the current ratio.
Vertical vs. Horizontal Analysis, Explained: How Common-Size Percentages Reveal Your Cost Structure While Trend Analysis Shows Where It Is Drifting
Common-size percentages show what each revenue dollar does; trend analysis shows where it is drifting — run both monthly to catch margin erosion early.