Posts Tagged: financial ratios

Financial Ratios

DuPont Analysis and its importance

The Return on Asset and Return on Equity are among the most important considerations investors take while making an investment decision. It gives an insight into how well a company uses its assets to generate revenue and determines the value it creates for its shareholders and investors.

Financial Ratios

Return on Equity: Definition, Formula, Calculation, Example and Importance

In the previous blogs, we understood the meaning and application of the accounting ratios of Return on Investments (ROI) and Return on Assets (RoA). While ROI gives an insight into overall profitability, ROA focuses on the returns generated through the efficient use of the assets a company possesses.

Financial Ratios

Importance of Return on Assets in Investment Decision

In the last blog, we understood the need to analyse how a company uses its investments and assets in order to generate profits and provide returns to its investors, through the calculation of Return on Investment. However, as mentioned earlier, ROI is a broader measure and focuses on the returns generated on different types of investments.

Financial Ratios

Analyzing Investment Decisions through Return on Investments

Before deciding to invest money in a company, a potential investor must analyze the company's ability to provide returns to its shareholders. Investors, business managers, and stock advisors analyze this ability by calculating various ratios and percentages based on the company's financial statements.

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Ratio Analysis: Guide to Efficiency Ratios Analysis

Stock investing involves a careful analysis of the companies and their financial data to arrive at their true worth. One can examine the company’s Quarterly and Annual accounts to determine how productively they are managing its assets and liabilities to maximize profits. However, this can be cumbersome and will not determine the efficiency levels of the business. An easier way to find out about a company's performance is to look at its financial ratios. Though this is not a foolproof method, it is a good way to run a fast check on a company's health. Read the guide on Ratio analysis

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ITC to acquire spice maker Sunrise Foods.

When we observe corporate stalwarts or ‘giants’, we see that they are never satisfied. They are always looking for more. If they have acquired a decent market share, they look for diversification of their offerings. If they have successfully diversified, they look for integrations (forward and backward). And, this keeps going on. The Fast Moving Consumer Goods (FMCG) industry is slightly more dynamic in this case. And hence, FMCG giants are always on the move.

Stock Market

How Important is ROE for Investors?

Forget head-and-shoulders, bear traps double bottoms, forget volume, and forget stochastics. When you’re looking at a company, the single-most-important number is return-on-equity. Return on Equity is how much profit a Company generates when compared to shareholder equity. What makes ROE so good as a tool to analyze a Company is because it doesn’t account for the price of the stock. It only measures the company’s performance, not the stock’s performance.

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How ROA and ROE help in analysing corporate health?

It’s a no brainer for an investor to look into the financial ratios before making investment decisions, as there are no single measures to tell the whole story, making informed investment decisions could be tricky and may rattle your grey cells.

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What is the importance of Interest Coverage Ratio?

"If there is one common theme to the vast range of the world’s financial crises, it is that excessive debt accumulation, whether by the government, banks, corporations, or consumers, often poses greater systemic risks than it seems during a boom." — Carmen Reinhart

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Why is Price to Earnings (P/E) Ratio important for Company Analysis?

For any investor, analyzing a company thoroughly is as important as knowing his risk appetite. Price to Earnings ratio of a stock forms an integral part of its valuation matrix and varies across sectors and companies.

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What is Quick ratio & Reasons for its Usage

An invetsor who tends to buy stocks should evaluate the financial statements of the company with great seriousness.

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Does your company have enough Liquidity?

Your company’s revenue figures are great to flaunt, but they don’t ultimately mean much if your cash flow is out of whack. Profit offers peace of mind, surely, but it doesn’t indicate that your business financials are sound. Only stable, reliable cash flows can truly demonstrate success.

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What is the Fixed Asset Turnover (FAT) Ratio?

A fixed asset turnover ratio is an efficiency ratio that shows the return received by a company on the investments made by them in fixed assets such as plant, machinery, equipment, etc., in relation to the total sales generated. In other words, it measures how efficiently a company uses its fixed assets to make sales. Creditors and investors refer to this ratio to identify the efficiency of the company in managing its fixed assets. They do so to interpret the returns they might earn on their investments made in the company and make sure that the earnings/revenues from the equipment are enough so that the company can pay back the loans that it has taken for it. The formula for calculating the fixed asset turnover ratio

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Why is it important to understand your investments?

“Caveat Emptor” or “Buyers Beware” is the central theme that runs across the world of investing. Every investor should have truckloads of knowledge about the investing world and where they are investing in. In this Monetary world, people want quick money.. easy money.. fast money.. And for this, they often resort to fraudulent activities, embezzlement, treachery, etc.

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5 components of Balance Sheet that influences Investment Decisions

How do you go about investing in stocks? Obviously, the first thing to do would be industry analysis - growth prospects, competitive analysis, barriers to entry, etc. But, as we had quoted Warren Buffet in a previous article, “there is a lot more to picking stocks than to work out which is going to be the most wonderful industry in the future.”

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Difference between market value and book value

All of these terms are used for the financial market and signify a particular meaning to the financial instruments. These terms have a different value for every financial instrument and should be taken into consideration. So let us know about every term in detail:

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What is Debt to Equity Ratio?

It is imperative and a task of paramount importance for an investor to examine the financial performance of a company from every angle before investing a single penny in that company. The true worth of the company can be detected by analyzing its financial ratios.

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What is Margin of Safety?

Origin of ‘Margin of Safety’

Posts Tagged: financial ratios

DuPont Analysis and its importance

Return on Equity: Definition, Formula, Calculation, Example and Importance

Importance of Return on Assets in Investment Decision

Analyzing Investment Decisions through Return on Investments

Ratio Analysis: Guide to Efficiency Ratios Analysis

ITC to acquire spice maker Sunrise Foods.

How Important is ROE for Investors?

How ROA and ROE help in analysing corporate health?

What is the importance of Interest Coverage Ratio?

Why is Price to Earnings (P/E) Ratio important for Company Analysis?

What is Quick ratio & Reasons for its Usage

Does your company have enough Liquidity?

What is the Fixed Asset Turnover (FAT) Ratio?

Why is it important to understand your investments?

5 components of Balance Sheet that influences Investment Decisions

Difference between market value and book value

What is Debt to Equity Ratio?

What is Margin of Safety?

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