Intangible assets include assets like goodwill, patent, trademarks, and the like. The issue with the value of intangible assets is that it is very subjective. The book value is only a perception of the price of intangible assets. The market perception of the price of intangible assets may be...
The above formula can be solved for any of the four parameters, given values for the other three. For example, we might have a goal of accumulating a particular sum of money by some future time. If the rate of interest which can be earned is known, the question becomes,what amount shou...
present value calculation is not the same as the interest rate that may be applied to the payments in the annuity. The discount rate reflects the time value of money, while the interest rate applied to the annuity payments reflects the cost of borrowing or the return earned on the investment...
The PV formula discounts the future value of an asset to what it would be worth today.Calculating present valueinvolves looking at an implied annualrate of return(whether that’s inflation or expected interest earned from an investment). This part of the formula is also referred to as the “...
The yield to maturity (YTM) is the expected annual rate of return earned on a bond, assuming the debt security is held until maturity. The yield to maturity (YTM) is calculated by the following formula: [Annual Coupon + (FV – PV) ÷ Number of Compounding Periods] ÷ [(FV + PV) ÷...
Lower Leverage Ratio ➝ Unlike coverage ratios, lower leverage ratios are viewed as positive signs of financial health. For example, the higher the times interest earned ratio (TIE), the better off the company is from a risk perspective. Why? A higher TIE ratio implies the company can pay...
The formula to calculate the rate of return (RoR) is: Rate of return=[(Current value−Initial value)Initial value]×100\text{Rate of return} = [\frac{(\text{Current value} - \text{Initial value})}{\text{Initial value}}]\times 100Rate of return=[Initial value(Current value−Initial...
The ratio value of less 1.0 means that the business will not be able to cover or meet its interest payments when due, and this, of course, threatens the continued viability of the business. Failure to make interest charges on time may bring a legal action by the company's creditors, pos...
Understanding, determining and applying EBITDA plays an important role in uncovering the value of your business and maximizing your exit strategy. From breaking down the definition and formulas of EBITDA, to outlining why it is an important term in the process of valuing andselling a business, thi...
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