Compounding Quality on LinkedIn: 10 Balance sheet ratios 1️⃣Working Capital 🔒Description: Working… | 10 comments (2024)

Back to basics. A good recap!

Important things to know

🖋️ Some useful formulas to see where a company stands. The balance sheet provides the owners (shareholders) with a snap shot of the current health of the company and how well it's equipped to face the challenges ahead. However the only downside is it doesn't take into account the potential risks that are outside the company's control e.g. Corona, natural disaster, rate hikes and generally economic risks. Hence during the Corona crises many companies went into liquidation. #balancesheet #accounting

Interesting KPIs to track

10 Balance sheet ratios1️⃣Working Capital🔒Description: Working capital is a measure of a company's liquidity and short term financial health🔑Formula: Current Assets- Current Liabilities2️⃣Current Ratio🔒Description: Company's relationship between its current assets and current liabilities🔑Formula: Current Assets / Current Liabilities3️⃣Quick Ratio🔒Description: Measures the capacity of a company to pay its current liabilities without needing to sell inventory🔑Formula: Current Assets - Inventory / Current Liabilities4️⃣Interest Coverage (ICR)🔒Description: Shows you how well a firm can pay the interest due on outstanding debt🔑Formula: EBIT / Interest Expense5️⃣Debt-to-Assets🔒Description: The total amount of debt a company has relative to its assets🔑Formula: Debt / Assets6️⃣Debt-to-Equity🔒Description: Ratio used to calculate a company's financial leverage🔑Formula: Debt / Equity7️⃣Asset Turnover🔒Description: Shows you how efficiently companies are using their assets to generate sales🔑Formula: Sales / Total Assets8️⃣ Days Sales Outstanding🔒Description: The average number of days it takes a company to receive payment for a sale🔑Formula: (Accounts Receivable / Sales) *3659️⃣Inventory Turnover🔒Description: Measures how efficiently a company uses its inventory to generate sales🔑Formula: Costs Of Goods Sold / Inventory Value🔟Net Debt / Free Cash Flow to Firm🔒Description: Measures how many years it would take a company to pay down all its debt🔑Formula: Net Debt / Free Cash Flow to Firm__🤔That's it for today. What's your favorite Balance Sheet Ratio? Join the discussion in the comments 📚 You liked this? Download my free Financial Analysis Course here: https://lnkd.in/eb6UJGXx

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10 Balance sheet ratios1️⃣Working Capital🔒Description: Working capital is a measure of a company's liquidity and short term financial health🔑Formula: Current Assets- Current Liabilities2️⃣Current Ratio🔒Description: Company's relationship between its current assets and current liabilities🔑Formula: Current Assets / Current Liabilities3️⃣Quick Ratio🔒Description: Measures the capacity of a company to pay its current liabilities without needing to sell inventory🔑Formula: Current Assets - Inventory / Current Liabilities4️⃣Interest Coverage (ICR)🔒Description: Shows you how well a firm can pay the interest due on outstanding debt🔑Formula: EBIT / Interest Expense5️⃣Debt-to-Assets🔒Description: The total amount of debt a company has relative to its assets🔑Formula: Debt / Assets6️⃣Debt-to-Equity🔒Description: Ratio used to calculate a company's financial leverage🔑Formula: Debt / Equity7️⃣Asset Turnover🔒Description: Shows you how efficiently companies are using their assets to generate sales🔑Formula: Sales / Total Assets8️⃣ Days Sales Outstanding🔒Description: The average number of days it takes a company to receive payment for a sale🔑Formula: (Accounts Receivable / Sales) *3659️⃣Inventory Turnover🔒Description: Measures how efficiently a company uses its inventory to generate sales🔑Formula: Costs Of Goods Sold / Inventory Value🔟Net Debt / Free Cash Flow to Firm🔒Description: Measures how many years it would take a company to pay down all its debt🔑Formula: Net Debt / Free Cash Flow to Firm__🤔That's it for today. What's your favorite Balance Sheet Ratio? Join the discussion in the comments 👇__📚 Sign up here if you want to receive my free Financial Analysis course: bit.ly/QCFinance

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Somewhere learningvery useful to understand the business

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Very comprehensive information and handy for Balance Sheet Analysis.

10 Balance sheet ratios1️⃣Working Capital🔒Description: Working capital is a measure of a company's liquidity and short term financial health🔑Formula: Current Assets- Current Liabilities2️⃣Current Ratio🔒Description: Company's relationship between its current assets and current liabilities🔑Formula: Current Assets / Current Liabilities3️⃣Quick Ratio🔒Description: Measures the capacity of a company to pay its current liabilities without needing to sell inventory🔑Formula: Current Assets - Inventory / Current Liabilities4️⃣Interest Coverage (ICR)🔒Description: Shows you how well a firm can pay the interest due on outstanding debt🔑Formula: EBIT / Interest Expense5️⃣Debt-to-Assets🔒Description: The total amount of debt a company has relative to its assets🔑Formula: Debt / Assets6️⃣Debt-to-Equity🔒Description: Ratio used to calculate a company's financial leverage🔑Formula: Debt / Equity7️⃣Asset Turnover🔒Description: Shows you how efficiently companies are using their assets to generate sales🔑Formula: Sales / Total Assets8️⃣ Days Sales Outstanding🔒Description: The average number of days it takes a company to receive payment for a sale🔑Formula: (Accounts Receivable / Sales) *3659️⃣Inventory Turnover🔒Description: Measures how efficiently a company uses its inventory to generate sales🔑Formula: Costs Of Goods Sold / Inventory Value🔟Net Debt / Free Cash Flow to Firm🔒Description: Measures how many years it would take a company to pay down all its debt🔑Formula: Net Debt / Free Cash Flow to Firm__🤔That's it for today. What's your favorite Balance Sheet Ratio? Join the discussion in the comments 👇__📚 Sign up here if you want to receive my free Financial Analysis course and plenty of other free investment resources: https://t.co/cwPWWDTvzO

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Understanding Financial Statements is a skill all Finance Professionals need to develop.

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