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Module 1: Accounting information

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Key ratios - stability

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XSIQ
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Accounting - Key ratios - stability

Key ratios - stability

Stability is the long term prospects of the business surviving.

RATIO
FORMULA
EXPLANATION

STABILITY

*Interest coverage ratio
Net cash inflow from operations + interest/interest expense
This ratio reflects the ability of a firm to meet the interest
requirements on borrowed funds. Some texts define this ratio as Net profit
+ interest/interest expense.

Gearing - Debt ratio
Total liabilities/total assets
Measures the percentage of borrowed funds against total assets.

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