I am trying to understand what a financial ratio shows.
It's the ratio "Interest cost as a percentage of sales = interest expense/sales"
Can you explain what this shows for a company.
Thank you
1
Expert's answer
2012-03-06T10:58:31-0500
Financial ratios identify the financial strengths and weaknesses of the company. Interest cost as a percentage of sales is a profitability ratio that shows a company's overall efficiency and performance. Interest cost as a percentage of sales depends on interest rates and net revenues of companies. Interest Expense ratio reflects the costs of a company's borrowings. Sometimes companies record a net figure here for interest expense and interest income from invested funds.
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