Sharpe Ratio and Risk-Adjusted Returns

In finance, one of the popular methods to adjust return rates of investments for risk is the Sharpe Ratio. William F. Sharpe developed the ratio in 1966 and revised it in 1994 to arrive at the formula we use today. Originally he called it the ‘reward-to-variability’ ratio. Later on, finance professionals started referring to it […]

Quick Ratio in Financial Analysis and Modeling

Introduction We perform a liquidity ratio analysis to evaluate the ability of the company to settle its obligations on time. The most common use case is when lenders and creditors want to gain a better understanding of the financial health of a borrower or customer. Analysts use the gained insights to set credit terms and […]

Performing Contribution Margin Analysis

Introduction The Contribution Margin is a significant financial metric that is sometimes neglected by managers. While profit margin is one we usually hold very important, it gives information only on the amount with which revenues exceed costs. On the other hand, Contribution Margin provides us with a way to see how exactly each separate product […]

DuPont Model for Business Analysis

It was 1912, and Donaldson Brown was working as an explosives salesman for the DuPont Corporation. About that time, the company treasurer John Raskob brought him into the financial activities of the company and encouraged him to use statistics to evaluate the business performance of the various activities under the DuPont corporation. Pierre du Pont, […]

Financial Ratios Analysis

Financial Ratio Analysis is a form of Financial Statement Analysis that we use to obtain a quick view of the financial performance of a company in critical areas. Ratios can be used to compare one company against another or one period against another.  To compare different companies, we use Common Size Statements, where we express […]

Types of Financial Analysis

Today we will take a brief look into the most commonly used types of Financial Analysis. We will see some examples but will not go into detail for each method. This article aims to show you the vast techniques you can apply when doing financial analytics. Hopefully, after reading it, you will be better equipped […]

Introduction to Financial Analysis

In today’s article, we will look at what Financial Analysis stands for, how to perform it and, most importantly, why it is essential for businesses. What is Financial Analysis? If you google the definition, what you get is something along the lines of Financial analysis is the assessment of the profitability, stability, and viability of […]