Leverage

Leverage in business refers to a company borrowing money to increase the volume of sales, it is expected that the additional profit generated will cover the interest and principle obligation of the amount borrowed.

Railroad Stock – Discovering Opportunities

Railroad stocks are solid and steady investments. There is limited downside risk and adequate historical data to illustrate buy and sell points for an investor. If properly applied, an investor should earn yields of 18 to 30% year on year. Learn how to develop the investment model for this particular industry.

Leverage Ratios

Financial Leverage

Leverage refers to the ability to lift a heavier load using a fulcrum and a lever. The common image is a board on a triangular pivot point with a heavy weight (M1) on one end and a lighter weight (M2) on the other. As the lever shifts towards the lighter load it starts to lift the heavier weight. In effect, as the distance ‘b’ gets longer, it becomes easier to lift M1. This principle works with finances too.  How so?

Return on Equity

Return on Equity

Another performance ratio used in business is return on equity. It is similar to return on assets except return on equity uses one section of the bottom half of the balance sheet.

Operating Profit Margin – Formula and Understanding

Operating Profit Margin - Formula and Understanding

Operating profit margin refers to the value earned as a percentage of net sales. The operating profit is often referred to as earnings before interest, taxes, depreciation and amortization, (EBITDA). This is a misleading reference as operating profit is actually defined differently by industry sector. EBITDA is used primarily in valuing businesses.

Fixed Assets To Debt Relationship

Fixed Assets to Debt Relationship

Every business owner, especially young entrepreneurs, must understand how long-term debt  is used to finance the purchase of fixed assets. It is a basic principle especially for start-ups. There is a relationship that exists between the two. If created correctly, profitability is enhanced and cash flow is maximized.

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