Using ratios to analyse companies

1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20   

4. Grouping the ratios

The ratios we will calculate from the M&S example are:

A. Operating Ratios

• Profit margin
• Return on capital employed
• Sales as a multiple of capital employed
• Stockturn
• Debt collection
• Payment of trade creditors
• Cash-to-cash cycle

B. Financial Ratios

• Gearing
• Interest cover
• Current ratio
• Quick ratio

We then look at other important investor ratios:

C. Earnings Ratios

D. Dividend Ratios

E. Other Ratios

1. Why bother with ratios? 2. A word of warning 3. The P&L and the balance sheet 4. Grouping the ratios 5. Profit margin 6. Return on capital employed (ROCE) 7. Sales as a multiple of capital employed 8. Stockturn 9. Debt collection 10. Payment of trade creditors 11. Cash-to-cash cycle 12. Gearing 13. Interest cover 14. Current ratio 15. Quick ratio (acid test) 16. Earnings ratios 17. Dividend ratios 18. Other ratios 19. Sources of information 20. Conclusion

• Magic Numbers