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Ratios help

Discussion in 'Beginner's Lounge' started by viciam, Aug 2, 2012.

  1. viciam

    viciam Well-Known Member

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    Hi all,

    I'm trying to learn how to calculate ratios on my quest to become a decent investor. So far I've made a list of ratios which I've got from reading tons of material on the internet.

    I understand what I am about to ask will take about 10 - 15 minutes of your time and for you to open your memory banks up and you might be thinking why would I do this for free, but this is important to me and you will really be helping a confused person out.

    So which one out of these ratios are the most important in investing and which other ratios would you add to this list, I will then go and read more about these and the other ratios you tell me about too.



    Market Cap
    Capitalization
    Working Capital
    Working Capital / Share
    Working Capital / Dollar of Sale
    Current Ratio
    Quick Ratio
    Debt to Equity
    Debt to Assets
    Long Term Debt to Assets
    Long Term Debt to Equity
    Overall Cash Flow
    Cash Flow to Earnings
    Interest Coverage Ratio
    Inventory Turnover
    Accounts Receivable Turnover
    Accounts Payable Turnover
    Asset Turnover
    Sales to Net Working Capital
    Current Liabilities to Inventory
    Current Liabilities to Net Worth
    Fixed Assets to Net Worth



    Equity per Share
    Earnings per Share
    Diluted Earnings per Share
    EPS Growth Rate
    Dividends per Share
    Dividend Payout Ratio
    Return on Equity
    Return on Capital Employed
    Return on Assets
    Price to Earnings Ratio
    Forward Price to Earnings
    Price to Book Ratio
    Price/Earnings to Growth
    Price/Earnings to Growth & Div Yield
    Price to Sales Ratio
    Price to Cash Flow
    Dividend Yield
    Enterprise Value Multiple
    Return on Investment
    Du Pont Return on Assets



    Gross Profit Margin
    Net Profit Margin
    Operating Margin
    Return on Assets
    Profit/Loss Ratio
    Revenue per Share
    Cash Flow Margin
    Cash Return on Assets
    Cash Return to Shareholders
    Return on Net Worth
    Return on Capital Employed
    Effective Tax Rate
    Operating Cash Flow
    Free Cash Flow

    Thank you in advance
     
  2. tech/a

    tech/a No Ordinary Duck!

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    In my view

    You only need to know your Reward to Risk Ratio.

    The massive list you have will only add to your confusion when trying to establish a " value "
    For the stocks you look at.

    You'll find even the most undervalued stocks tank and your R/R goes with it!

    How you manage your trade and more importantly your portfolio----will determine your profitability---
    Not admirable in depth research.
     
  3. wayneL

    wayneL Rotaredom

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    I would agree, but I'm a technical trader as well.

    But something tells me OP is not a technical trader. This makes R/R as fuzzy a concept as those other ratios.

    For the fundy investor some of those other ratios are important, to them. Let's let them at it IMO.
     
  4. tech/a

    tech/a No Ordinary Duck!

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    Diplomacy--Wayne

    I employ the Time Reward Ratio.

    And will leave them to it with the following.

    If your looking for a way to invest in the markets once
    mastered which can take all of 10-30 mins a day and
    you can work your own ratios quickly and easily while
    making clear cut decisions about a stock/index or commodity
    with the ability to trade short as well as long.

    CONSIDER TECHNICAL TRADING.
     
  5. viciam

    viciam Well-Known Member

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    Oh god still so confused :(

    I'm still trying to find myself as an investor, but I think Im probably a value investor with a hint of a growth investor
     
  6. ENP

    ENP Well-Known Member

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    I consider myself a value/long term type investor and the things I look for number crunching wise are:

    - return on equity
    - gross and net profit margins
    - 5 and 10 year growth rates in revenue, profit, EPS and dividend.
    - P/E ratio
    - debt/equity ratio
    - market capitalisation

    Why these?

    If I can find these out, I can find a company that I consider cheap for what the price currently is. Whether it can earn better returns and margins over time than it's main competitors and the market in general. Whether it is growing because of aquisition or organically and how much debt it is using to grow. I also prefer bigger companies as opposed to smaller, speculative type companies (although I've learnt this the hard way through trial and error).

    It's along the lines of Warren Buffett but I've tweaked it a bit to suit me. I used to own some smaller companies with the hope of getting rich quick, but I've come to realise I quite like sleep and my sanity so I have a more stable approach to picking my investments. I also don't use debt to invest like I used to, lost too much sleep also.

    I'm currently invested in RYM Ryman Healthcare on the NZX where I live in New Zealand, CCL Coca Cola, CCP Credit Corp and RHC Ramsay Healthcare on the ASX and NKE Nike, MCD McDonalds and WWY Wrigleys Chewing Gum on the USA NYSE market. Look through their annual reports and you can see a similar trend in the above number crunching I said above. Then compare it to a company such as perhaps Telstra or Quantus and you can see a markable difference in the numbers.
     
  7. burglar

    burglar Well-Known Member

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    The CEO wants the Executive Summary in the Annual Report.
    The CFO wants Accounts Receivable, Accounts Payable et al.
    The Operations Manager wants the Operating Statistics.
    The Marketing Manager wants the Sales Reports, SWOT analysis etc.
    The Manager, Corporate Affairs wants KPI’s (Key Performance Indicators).

    It’s like tech/a says, “You only need to know your Reward to Risk Ratio.”!!
    I'm with the duck here 100%
     
  8. springhill

    springhill Make the drill work for YOU

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    Agree.

    MC:Cash ratio is important to me.
     
  9. odds-on

    odds-on Well-Known Member

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    RM Intrinsic Value / Median Analyst Price Forecast.
     
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