Do you Understand Interest Coverage Ratio?

As a good financial management principle, it is always advisable to have an optimum mix of debt and equity to maximize your return on the capital invested into the business. Equity is the amount of capital invested by the owners of the business while debt consists of the business loans, mortgage loans availed from banks and financial institutions.

When one takes loans from banks, it has to service the debt by the regular principal and interest payments. So, indeed it makes sense to know how better placed you are in terms of servicing your debt obligations, especially the interest part.

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LoanFrame offers entire portfolio of SME loan products: Shailesh Jacob | SME Times

In an exclusive interview with SME Times, Shailesh Jacob, Founder & CEO of LoanFrame.com,  a fintech company that provides a comprehensive range of financing solutions to small and medium scale enterprises,  gives a thorough picture of the SME financing situation in the country.

He adds that India, compared to its global peers, has the most neglected SME sector, which is reeling under some major challenges such as lack of funds and higher interest rates, over-reliance of banks on large corporates as a customer base and demand of collateral by the financial institutions.

                                                                                                         Excerpts from the interview…

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Is Your Business Deploying Its Assets Efficiently?

Every business invests in several assets to earn income. These may include fixed assets which include immovable property and machinery or current assets which include inventory and other working capital requirements.

Asset Turnover Ratio determines how effectively a business is deploying its assets to generate revenue. In financial terms, Asset Turnover ratio is defined as the ratio of Net Revenue of the company to its Total assets (which comprises of both Fixed as well as Current assets).

Thus, Asset Turnover Ratio = Net Sales / Total Assets

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