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A current ratio lower than the industry average could mean the company is at risk for default, and in general, is a riskier investment. However, special circumstances can affect the meaningfulness ...
It is the ratio of a firm's current assets to its current liabilities, Current Assets / Current Liabilities . The current ratio is an indication of a firm's accounting liquidity. Acceptable current ratios vary across industries. [1] Generally, high current ratio are regarded as better than low current ratios, as an indication of whether ...
When it comes to long-term investing, equities provide a return that will hopefully exceed the risk free rate of return [7] The difference between return and the risk free rate is known as the equity risk premium. When investing in equity, it is said that higher risk provides higher returns.
This measure compares a post-tax, pre-interest cash flow to the gross level of capital invested and is a useful measure of a company’s ability to generate cash returns on its investments. In principle, this ratio is similar to the ROE ratio, but CROCI is calculated on a cash basis and on an EV-basis, taking into account assets funded by all ...
One key result of the above analysis is the two mutual fund theorem. [12] [13] This theorem states that any portfolio on the efficient frontier can be generated by holding a combination of any two given portfolios on the frontier; the latter two given portfolios are the "mutual funds" in the theorem's name. So in the absence of a risk-free ...
If at any time there is an investment that has a higher Sharpe ratio than another then that return is said to dominate. When there are two or more investments above the spectrum line, then the one with the highest Sharpe ratio is the most dominant one, even if the risk and return on that particular investment is lower than another.
Reinvestment risk and interest rate risk have offsetting effects: higher market rates decrease the market value of the bond, but increase the interest earned on reinvested coupons. A bond portfolio strategy known as immunization takes advantage of these offsetting effects.
Our current leverage ratio remains below our long-term target range of 20% to 30%, which we provide capacity to expand our capital structure prudently and based on market conditions.