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The head of finance is talking about cash flow, debt to equityratio, and EBITA. You are thrilled to be in this new role and faced with new responsibilities outside of the functional job you once excelled in. A blank look comes over your face.
In fact, analysts and investors want companies to use debt smartly to fund their businesses. That’s where the debt-to-equityratio comes in. What is the debt-to-equityratio? “It’s a simple measure of how much debt you use to run your business,” explains Knight.
Losses in AP will overwhelm many institutions' equity cushion. The average debt-to-equityratio of the 10 largest MFIs in India is 7.06 , indicating an average 12% equity cushion. But just rescheduling debt payments may not be enough. At the prevailing ratios, management failed to act prudentially.
In my experience, most CEOs, CFOs, and other C-suite executives involved in strategy formulation know these finance basics. (Or, Isn’t that a function of risk parameters and the debt-to-equityratio? Or, they learn fast after a few investor meetings.) But consider the basics.
Nonetheless, statistics show that women-owned businesses, which account for one-third of Swedish businesses, are not granted the corresponding proportion of government venture financing; in fact, women-owned businesses receive only 7%. Debt-to-equityratio (leverage): the degree to which an entrepreneur exposes his or her business to risks.
DuPont sent Donaldson Brown, a promising engineer-turned-finance staffer, to Detroit to sort things out, and sort them out he did. Brown noted a simple fact: Return on equity can be broken down into a three-part equation. Thus Brown not only sowed the seeds of the today's hated silos, he also set three "runaways" in motion.
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