- Current Ratio
- The ratio of current assets to current liabilities. This indicates the ability to pay it's current debts. You want a ratio of 1 or better.
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- Price to free cash flow
- Lower is generally better. Used to compare companies or a company to the industry. (Free cash flow the cash available for distribution among all security holders. It is basically difference between cash coming in and cash going out, not including interest. See Wikipedia for the gory details. Free cash flow is different from earnings in that earnings do not include expenses related to capital expenditure and working capital.)
- Cash ratio
- The ratio of cash and equivalents to current liabilities. It indicates the ability to pay of short term debt. Higher numbers make it easier for a company to ask for new loans, increase in credit lines, etc.
- Interest coverage
- The ratio of earnings before interest and taxes to interest expenses. Indicates the ability to make its interest payments on its outstanding debt. Higher is better
- Price to tangible book
- Indicates how much you are overpaying for the company's real assets. The tangible book values is how much would be left over if the company were to declare bankrupcy. It also indicates the lowest possible price a company could trade for.
- Retention ratio
- The proportion of the earnings that are not paid out as dividends.
- Payout ratio
- The proportion of the earnings that are paid out as dividends. Ideally, retention ratio + payout ratio = 1. A payout ration of over 100% is unsustainable in the long run.
- Levered free cash flow
- Is free cash flow less interest payments. It's the amount of cash available to stock holders
- Long-term debt-to-equity
- The ratio of total long term debt divided by the total equity. Lower is better. Long-term debt is debt that is not expected to be payed off in the next year. As debt levels fall, more cash is freed up from interest payments.
- Total Debt to Total Assets Ratio
- This measures a company's financial risk by determining the proportion of a company's assets are financed by debt. Lower is better, a value greater than 1 means a company has more debt than assets.
- Debt ratio
- Strangely enough, the debt ratio is the ratio of total liabilities to total asests. Total liabilities include things other than debt. Less is better.
- Debt to Equity Ratio
- Total Liabilities / Shareholder's Equity. This is a measurement of how much suppliers, lenders, creditors and obligators have committed to the company versus what the shareholders have committed. A higher ratio means the company has been financing growth with debt and may have problems generating enough cash to cover its obligations.
- Capitalization Ratio
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- Long Term Debt / Long Term Debt + Shareholders' equity. Ideally you want a company to use equity to finanace its operations rather than debt, so lower is better.
- Cash Flow to Total Debt Ratio
- Operating Cash Flow / Total Debt. This indicates a company's ability to cover total debt with its yearly cash flow from operations.
- Operating cash flow
- is like free cash flow, but not include capital expenditures. It's generally a better measure than earnings because a company can fiddle things to boost the earnings, but you can't futz with cash.
- Free cash flow yield
- Free cash flow per share divided by share price. Higher is better.
