Three Key Ratios For Investors

if you could only have four ratios to evaluate a company what would they be? This is a fun question that is popular in investing circles. For a laugh I’ll take my shot at it, what would you pick?

1) Current Ratio

Current Assets / Current Liabilities
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Red Flags: Intangibles

I very much dislike intangible assets, the growth or continued presence of them on a balance sheet always throws up a red flag for me. Maybe it is due to my value investor perspective but giving financial credence to a resource that I can’t see, can’t touch and can’t prove generated a cent of revenue in a business is something I just don’t like.
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Income Statement – Efficient Businesses

An efficient businesses is agile; not burdened by the overhead of paying for components that don’t add any value to the bottom line. The more lean and efficient a business the more options that business has open to it in terms of controlling its future.
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The Balance Sheet: Goodwill

To understand a balance sheet requires that we understand every line item, what each means, and how it can be manipulated. Today we are going to look at the line item for Goodwill.
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