[ finance ] ratio

1) company leverage : how many borrow v.s. assets
dept ratio = total liabilities / total assets
average dept ratio for large compnay : 50-60%

2) current ratio : liquidity
current ratio = current assets / current liabilities
if < 1, if company stops today, they will not have money to pay all the asset.
Bank prefer less stable companies with current ratios 2:1 or higher

3) return on sales
return on sales = net income / sales
net income = profit ( after pay for all expenses )
Average return on sales for tech companies is 20%

4) asset turnover : efficient of company
asset turnover = sales / total assets
how efficient the company use assets to generate sales

5) return on equity
return on equity = net income / equity
most companies have a return on equity between 10-20%

6) price-earnings ratio : measure of growth
price-earnings ratio = market value of shares / net income

most companies have a price-earnings ratio between 10-30

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