The Instacart Business Model
In the past few years, the online grocery shopping space has grown by leaps and bounds. Customers have generally been inclined towards online delivery because of the convenience that it offers. The spread of the coronavirus pandemic has also accelerated this trend. It is estimated that 10% of all grocery sales which happened in 2021 […]
Multi-Banking: Meaning and Characteristics
The commercial banking industry is undergoing a rapid transformation. This transformation has been enabled by the increasing use of digital technologies in the commercial banking industry. Open banking has become a game changer when it comes to the field of commercial banking. It has enabled the use of many other modern banking solutions. Multi-banking is […]
Types of Capital Rationing
As discussed in the previous article, capital rationing is a form of capital budgeting. In capital rationing we change the unlimited capital assumption of capital budgeting and we try to choose projects with the finite capital that we have on hand. This finite capital may be in the form of capital that the firm already […]
How to Reduce Return Rates in Retail?
In the previous article, we have already seen that the return policy offered by a retailer can deeply influence their profitability as well as their cash flow. Over the years, retailers have realized the tactical importance of return rates. As a result, they have taken measures to reduce the same. In this article, we will […]
Advantages and Disadvantages of Freely Floating Exchange Rates
The freely floating currency system is the predominant system of foreign exchange that is prevalent in the world today. As globalization has progressed, more countries have abandoned their currency pegs and have allowed their currencies to freely float. Some have been forced to do so by market participants whereas others have made their choice in […]
The proprietary ratio is not amongst the commonly used ratios. Very few analysts prescribe its usage. This is because in reality it is the inverse of debt ratio. A higher debt ratio would imply a lower proprietary ratio and vice versa. Hence this ratio does not reveal any new information.
Proprietary Ratio = Total Equity / Debt + Equity
The proprietary ratio is the inverse of debt ratio. It is a part to whole comparison. The proprietary ratio measures the amount of funds that investors have contributed towards the capital of a firm in relation to the total capital that is required by the firm to conduct operations.
On the other hand, if investors are from the old school of thought, they would prefer to keep the proprietary ratio high. This ensures less leverage and more stable returns to the shareholders.
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