Monday, July 21, 2014

Top 6 Ratios for analyzing a stock.



Series:  Ratio Analysis  (1  post )


1 Liquidity Measurement Ratios.    
Liquidity ratios attempt to measure a company's ability to pay off its short-term debt obligations. This is
done by comparing a company's most liquid assets (or, those that can be easily converted to cash), its short-term liabilities.

2 Profitability Indicator Ratios
Profitability Indicator Ratios,  give users a good understanding of how well the company utilized its resources in generating profit and shareholder value.

3 Debt Ratios.   
Debt Ratios ratios give users a general idea of the company's overall debt load as well as its mix of equity and debt. Debt ratios can be used to determine the overall level of financial risk a company and its shareholders face. In general, the greater the amount of debt held by a company the greater the financial risk of bankruptcy. 
4 Operating Performance Ratios
Operating Performance Ratios  is a rough measure of the productivity of a company's fixed assets (property, plant and equipment or PP&E) with respect to generating sales. For most companies, their investment in fixed assets represents the single largest component of their total assets. This annual turnover ratio is designed to reflect acompany's efficiency in managing these significant assets. Simply put, thehigher the yearly turnover rate, the better.

5 Cash Flow Indicator Ratios
The ratios in this section use cash flow compared to other company metrics to determine how much cash they are generating from their sales, the amount of cash they are generating free and clear, and the amount of cash they have to cover obligations.

6 Investment Valuation Ratios
Investment Valuation Ratios  compares a stock's per-share price (market value) to its book value (shareholders' equity). The price-to-book value ratio, expressed as a multiple (i.e. how many times a company's stock is trading per share compared to the company's book value per share), is an indication of how much shareholders are paying for the net assets of a company.

Next Post on Beginning Investing: Liquidity Measurement Ratios.(Current Ratio)    

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  7. Hey I am really impressed to know these essential ratios for analysing the stock. Keep up the good work. Even I want to have a good investment portfolio and all such details are highly valuable for me. Even I would prefer options that have good Profitability Indicator Ratios. Looking for some details about MFs, what is equity and forex. Can you help regarding it?