What is the transmission ratio?
The transmission ratio is a general term concerning several formulas and conditions that measure the amount of wealth that the company has, unlike the money owed to creditors. On a large scale, the final gearbox ratio is calculated by taking all the borrowed money of the company and dividing it into the amount of its own capital, including loans. More specific conditions that fall into this blanket include the ratio of interest coverage, debt/equity ratio, equity ratio and debt ratio. All of these calculations are intended to assess the company's leverage, a scale of how much of its financing comes from external sources, unlike business owners. If these amounts borrowed start to eat too much percentage of the company's capital, then the company is reportedly strongly used and vulnerable.
The use of the gearbox ratio to measure the amount of lever effect is a solid way for investors to decide on the financial power of the company. By comparing the various levers that other companies in the same industry, a clear image of relying on debt is achieved. In general, the more business is, the less the company should be used. This is because businesses in such industries must be able to easily weather and minimum.
For the most complete picture of the company's independence on the debt, the total transfer ratio, in which the capital that the company has, may be distributed by the total money owed. From this general overview, certain ratios can be used to determine individuals, where the company is either weak or strong in terms of how it is used. The debt/equity ratio is similar to the overall gearbox ratio, with a slight turn in taking the debt and dividing it with its own capital.
similar to thoseo is the ratio of debt, which is the total debt divided by overall assets, and the ratio of its own capital, which is divided by capital. In addition, there is an ratio of interest coverage, also known as Times Heathed, which pays special attention to interest owed for borrowed money. This number is first achieved by a total of the Company's earnings before interest and taxes and then by the division due.