Gives the company’s pricing policy and mark-up margins. An adequate gross margin allows a company to pay its expenses, and then expand. - gross profit margin, Determines the average interest rate at which a company borrows funds. - average interest rate, Compares the current market price with earnings to calculate if a stock is over or under valued. Used as a prediction or expectation of future performance. - price/earnings ratio, Indicates the return a company gets on the owners’ investment. Companies that make high returns often do not require more debt investments. - return on equity, Shows the turnover of inventory, and can be compared against sales figures, to show the demand for the company’s products. - inventory turnover, Indicates what proportion of equity and debt an enterprise uses to finance its assets. A more stringent test is to use just the long-term debt. - debt/equity ratio, Calculates the profit made on a per-share basis. This is quoted by U.S. publicly held companies in their financial statements. - earnings per share,

Business Skills: Financial Terms 2

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