Here are all the Financial Ratios you will need to evaluate a company -
Financial Ratios Covered ⬇️
- P/E
- P/B
- Current Ratio
- Quick Ratio
- ROCE
- ROE
- D/E
- P/S
- PEG
- Price-to-Cash Flow (P/CF)
⚡ & many more 😄
Here is the Thread🧵⬇️
1. Price-To-Earnings (P/E)
▪︎Most Widely Used Metric
▪︎High P/E ratio means either the company is overvalued or is on a trajectory to growth
▪︎Low P/E ratio indicates either the company is undervalued or soon the profits will disappear.
2. Price-To-Book (P/B) -
Book Value = Total Assets - Total Liabilities
▪︎It's useful to evaluate companies with large tangible assets in their balance sheets.
▪︎It's a good Metric to Evaluate Bank Stocks but less useful for Service & IT Stocks.
3. Current Ratio
= Current Assets/Current Liabilities
▪︎A higher ratio often indicates greater liquidity and more stability.
▪︎It helps us gauge the short-term financial strength of a company.
▪︎The current ratio gives an idea of a company’s operating cycle.
4. Quick Ratio -
▪︎A Liquidity crisis can arive even at healthy companies that's why I prefer Quick Ratio over Current Ratio because it's more conservative.
▪︎It excludes inventory & other current assets, which are generally more difficult to turn into cash.