6 Ratios that Indicate Health of a Company
Return On Capital Employed
It helps to understand how well a company is generating profits from its capital.
Capital employed = Share holder's fund + non-current liability
Ideal Value: 10% (double of interest rate)
Return On Tangible Assets
How efficient a company is in generating profits using its assets.
Ideal Value: 5-20%
It measures a company's ability to pay short-term obligations or those due within one year.
Ideal Value: 2:1
It measures a company's capacity to pay its current liabilities without needing to obtain additional financing.
Ideal Value: 1:1
Quick Assets = Cash + Cash Equivalents + Marketable Securities + Net Accounts Receivable
Return on Equity
It expressed as ratio of net income by the amount of shareholder’s funds.
Ideal Value: 12% & above
Return on Equity: a measure of the degree to which a company is financing its operations through debt versus wholly owned funds.
Ideal Value: < 2
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