Back in 1988, Wall Street was embroiled in intense debate surrounding a company with which we are all deeply familiar, The Coca-Cola Company.Back then, many analysts were skeptical. They saw Coca-Cola...
It’s better to buy a GREAT company at a fair price rather than buying a PENNY company at a cheap price.
Financial ratios for listed companies are typically grouped into several categories based on what aspect of the business they measure. Here are the standard groups:Profitability RatiosMeasure how effi...
Fundamental analysis typically groups financial ratios into these categories:
**1. Liquidity ratios** — ability to meet short-term obligations
- Current ratio, quick ratio, cash ratio
**2. Solvency/leverage ratios** — long-term debt capacity and financial risk
- Debt-to-equity, debt-to-assets, interest coverage ratio
**3. Profitability ratios** — earnings performance
- Gross margin, operating margin, net margin, ROE, ROA, ROIC
**4. Efficiency (activity) ratios** — how well assets are used
- Inventory turnover, receivables turnover, asset turnover, days sales outstanding
**5. Valuation (market) ratios** — how the market prices the stock relative to fundamentals
- P/E, P/B, P/S, EV/EBITDA, dividend yield, PEG ratio
**6. Growth ratios** — trends over time
- Revenue growth, EPS growth, earnings growth rate
**7. Cash flow ratios** — quality of earnings and cash generation
- Operating cash flow ratio, free cash flow yield, cash flow to debt
Analysts usually combine several of these groups rather than looking at one in isolation — for example, pairing profitability with leverage to see if high returns are coming from excessive debt, or checking valuation against growth to judge if a stock is fairly priced. Want me to go deeper on any one group, or walk through how to apply these to a specific company?
My Uncle’s Strategy Rules
Look for companies:
1. Strong Shareholder
2. Competent CEO n Directors
3. Strong Balance Sheet
4. Recurring Revenue
5. Sustainable Cash Flow
6. Durable Business Moat
7. Too Big to Fail for the Country
8. The Whole World needs it
9. High Barrier of Entry
10. Value-added Brand
11. High Net Profit Margin
12. High ROE
13. How Much can I make