Ratios
Return on Equity
Return on Equity = Return on Income / Owner's Equity - Measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. - For high growth companies you should expect a higher ROE.
Return on Sales
Return on Sales = Net Income/Net Sales - Used to evaluate a company's operational efficiency - Increasing ROS indicates the company is growing more efficient. - Decreasing ROS could signal looming financial troubles.
Accounts Receivable
Accounts Receivable = Accounts Receivable/Sales - Refers to money owed by customers to another entity in exchange for goods or services that have been delivered or used, but not yet paid for. - If a company has receivables, this means it has made a sale but has yet to collect the money from the purchaser.
Earnings Per Share
Earnings per Share =Net income / Shares Outstanding - The portion of a company's profit allocated to each outstanding share of common stock.
Current Ratio
Current Ratio = Current Assets/Current Liabilities A current ratio below 1.0 signifies that a company does not have enough current assets to pay short-term liabilities. The higher the better.
Debt to Equity
Debt to Equity = Total Liabilities/Equity - Indicates how much debt a company is using to finance its assets relative to the amount of value represented in shareholders' equity. - High debt/equity ratio means that a company has been heavily taking on debt (high risk)
Inventory Turnover
Inventory Turnover = Cost of Goods Sold/Avg Inventory - Showing how many times a company's inventory is sold and replaced over a period. - Low turnover implies poor sales and excess inventory. - High ratio implies either strong sales or ineffective buying.
Quick Ratio
Quick Ratio = (Cash + Marketable Securities + Receivables )/Current Liabilities - Measures the dollar amount of liquid assets available for each dollar of current liabilities. - A quick ratio of 1.5 means that a company has $1.50 of liquid assets available to cover each $1 of current liabilities. - The higher the quick ratio, the better the company's liquidity position