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1. Debt-to-Equity Ratio (D/E Ratio)

What it is:
A measure of how much debt a company uses compared to shareholders’ equity.

Formula:
Debt ÷ Equity

Meaning:

• A low ratio (e.g., 2.96%) means the company uses very little debt → financially stable.

• A high ratio means the company is heavily borrowing → riskier, especially if profits fall.

Why it matters:
Shows how risky the company is. Investors prefer companies that don’t rely too much on loans.

2. Debt

What it is:
Money the company has borrowed and must pay back (loans, bonds, credit, etc.)

Meaning:

• More debt = higher obligations.

• Too much debt can damage profitability.

3. Interest Coverage Ratio

What it is:
How easily the company can pay interest on its debt from profits.

Formula:
EBIT ÷ Interest Expense

Meaning:

• A ratio of 5.8x means the company earns 5.8 times the money needed to pay interest → very safe.

• Lower than 2x is dangerous.

4. Cash

What it is:
Money the company has available immediately (bank balances + cash).

Meaning:
Cash cushions the business, helps it survive downturns, buy supplies, pay workers, etc.

5. Equity

What it is:
The value of the company is owned by shareholders.

Formula:
Assets – Liabilities

Meaning:
High equity means the company is in a strong financial position.

6. Total Liabilities

What they are:
Everything the company owes others (debt + payables + obligations).

Types:

• Short-term liabilities: due within 12 months.

• Long-term liabilities: due after 12 months.

7. Total Assets

What they are:
Everything the company owns or controls that has value.

Examples:

• Cash

• Buildings

• Inventory

• Receivables

• Machinery

8. Physical Assets

What they are:
Tangible assets like property, machinery, and equipment used in daily operations.

9. Inventory

What it is:
Goods the company holds for sale.
For manufacturing companies → raw materials + finished products.

10. Receivables

What they are:
Money customers owe the company for products/services already delivered.

11. Cash & Short-Term Investments

What they are:

• Cash

• Easily tradable investments that can be converted to cash quickly (within 1 year)

Good for covering short-term expenses.

12. Accounts Payable

What it is:
Money the company owes to suppliers for goods/services it received earlier.

13. Short-Term Liabilities

What they are:
Obligations due within 12 months (e.g., accounts payable, short-term loans).

Why it matters:
You check whether short-term assets > short-term liabilities.
If yes → company is liquid
If no → risk of cash shortage

14. Long-Term Liabilities

Debts the company must pay in more than 12 months (bank loans, bonds, leases).

15. Debt-to-Equity History

What it is:
A chart showing how a company’s debt, equity, and cash changed over time.

Why it matters:

• Falling debt = improving balance sheet

• Rising equity = the company becoming stronger

• Rising cash = more stability and room for growth

16. Equity Growth Trend

When equity rises consistently (like your chart), it means:

• The company is profitable

• It is retaining earnings

• It is stable and becoming financially stronger

17. Short-Term Assets Exceed Liabilities

This means:
The company has enough cash, inventory, and receivables to pay all its short-term debts.

This is a key indicator of good liquidity.

18. Long-Term Assets Exceed Long-Term Liabilities

Meaning:
The company is financially strong in the long run and not drowning in long-term debt.

Why These Terms Matter for Investors

These terms help you answer crucial questions:

1. Can the company survive tough times?

→ Look at cash, short-term assets vs liabilities.

2. Is the company risky or stable?

→ Look at debt-to-equity ratio.

3. Can it pay its debts comfortably?

→ Check interest coverage ratio.

4. Is the company growing in strength over time?

→ Look at long-term equity trends.

5. Does the company manage its money well?

→ Examine liabilities and cash levels.

Sources & References

• Debt-to-Equity Ratio — definition, formula, and interpretation from Investopedia Investopedia

• Interest Coverage Ratio — explanation of how it’s calculated and used. Investopedia+2Kotak Securities+2

• Solvency vs. Liquidity Ratios — breakdown of long-term (e.g., D/E, ICR) vs short-term metrics. Investopedia

• Debt Ratio (Debt / Total Assets) — explained in a financial-ratios article. Bristax

• Solvency Ratios Overview — from a financial-management / broker-analysis point of view. Ventura Securities