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What do the financial metrics indicate and how are they calculated?

Yearly Turnover – Net sales of last year

Gearing or “Debt-to-equity ratio” is a measure of a company’s financial leverage and shows the extent to which its operations are funded by lenders vs. shareholders.

Calculation: (total debt) / (total equity)

The solvency ratio indicates whether a company’s cash flow is sufficient to meet its short-term and long-term liabilities.

Calculation:  (Net income + depreciation) / (Short-term Liabilities + Long-term Liabilities)

The net debt to EBITDA ratio is a debt ratio that shows how many years it would take for a company to pay back its debt if net debt and EBITDA are held constant.

Calculation: (Net debt / Ebitda)

The interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a company can pay interest on outstanding debt.

Calculation: (Ebit / Interest expenses)

Current ratio: (Current assets / Current Liabilities)

Quick ratio: ((Current Assets – inventories) / Current Liabilities)

Cash Ratio: (Cash and cash equivalents / current liabilities)

The Altman Z-score is the output of a credit-strength test that gauges a publicly traded manufacturing company’s likelihood of bankruptcy.

Calculation: Z-Score = (1.2A + 1.4B + 3.3C + 0.6D +1.0E)

A = (Working Capital / Total Assets)

B = (Retained Earnings / Total Assets)

C = (Ebit / Total Assets)

D = (Market Value of Equity /Total Liabilities)

E = (Sales / Total Assets)

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Updated on May 7, 2018

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