TOOL 5.5
Profitability
| Definition | Ratio Measurement |
| The ability of a company to add value from the costs incurred in the profit and loss account and the assets employed in the balance sheet – i.e. maximise margins and asset turnover / utilisation (link to Liquidity / Cash flow) | – EBIT(DA*) / Net Sales – Gross Income / Net Sales – Interest Coverage – Return on Capital Employed* – Business specific measure of fixed asset utilisation – Labour efficiency |
Liquidity / Cash Flow
| Definition | Ratio Measurement |
| The ability of a company to generate sufficient cash flow from its normal sustainable operations to meet both the cost of debt and any scheduled repayments | – Payment Capacity – Fixed Charge Coverage |
| The ability of a company to turn assets into cash in time to meet obligations | – Net Working Assets/Net Sales – Net Operating Cycle (In days) – Days Inventories – Days Receivable Trade – Days Payable Trade |
Solvency
| Definition | Ratio Measurement |
| – Appropriate mix of own and third party funding of assets – Adequate cushion to meet off-balance sheet claims – Matching of tenors and currencies | – Debt / EBITDA – NW/Total Assets – TNW/Total Assets minus Intangibles – Risk Bearing Capital/Total Assets – Debt/Net Worth – Senior leverage – Current Ratio |
