Ratios & Business Leverage
Operating Leverage
Why a 10% jump in a company's sales can sometimes turn into an 80% jump in its profit — and why the same 10% drop can be brutal for the exact same reason.
Financial Leverage
Why borrowing money can make a company's returns to shareholders look spectacular in a good year — and why the exact same borrowing can wipe shareholders out in a bad one.
Return on Capital Employed (ROCE)
Why a company that borrows heavily to boost its Return on Equity can still be a genuinely mediocre business underneath — and why ROCE is the number that catches what ROE alone can hide.
Earnings Per Share (Basic & Diluted)
Why a company's reported net profit can go up while its Earnings Per Share goes down — and why the 'diluted' EPS number, not the flashier 'basic' one, is the one that actually matters most.
Share Buybacks
Why a company spending thousands of crores of its own cash to buy its own shares doesn't record a single rupee of 'expense' for it — and how it can still boost every remaining shareholder's stake in the business without them buying anything.
Rights Issues & Bonus Shares
Why a company can issue millions of brand-new shares to its existing shareholders for free — and why that alone doesn't make any single shareholder a single rupee richer or poorer.
Working Capital Cycle (Cash Conversion Cycle)
Why some businesses can grow rapidly using OTHER people's money, essentially interest-free, while other businesses need to fund every single rupee of growth out of their own pocket, or borrow to do it.
Non-GAAP Measures & Adjusted EBITDA
Why a company can report a loss under standard accounting rules in one part of its results presentation — and a healthy profit just a few pages later, in the exact same document, using numbers it largely defines itself.
Dividend Accounting & Distribution
Why a dividend a company's board formally recommends, and that shareholders widely expect to receive, doesn't actually show up as a liability on the balance sheet until shareholders themselves vote to approve it.
IPO Accounting — Share Issue Expenses
Why the tens of crores a company spends on investment bankers, lawyers, and printing costs to go public never actually shows up as an 'expense' reducing its reported profit.
Promoter Share Pledging
Why a sharp, sudden fall in a company's own share price can trigger a genuine, forced sell-off of even MORE of that same stock — turning an ordinary market decline into a self-reinforcing crash.