The 4 Most Important Financial Metrics
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- Опубликовано: 26 авг 2024
- Financial metrics are the key numbers that you can focus on in financial statements. There are three financial statements, the balance sheet, the income statement and the cash flow that we like to look at to find important metrics. bit.ly/2xOCmRl
Were going to look at some of the most important financial metrics that you as investors can use to evaluate a company.
The first important number we look at on the balance sheet is liquidity. Can the company you’re looking at really cover everything that they need to cover in the next year? Or have they somehow overloaded themselves with short term debt and obligations that they could really run out of cash in the next year?
In order to evaluate this, we want to look at the current ratio. Essentially it is a measure of working capital. It compares the current assets, which are assets that can be turned into cash in the next year, with current liabilities, which are obligations that have to be paid in the next year.
What you want to look for when evaluating a company is a 2:1 ratio of liquidity to debt. Some companies are very well run that have a lower ratios than that, because they are controlling their cash very well, or they are in an industry that isn’t growing fast so they don’t need as much liquidity.
These companies work their capital down so they don’t need as much cash on hand all the time and they can give that money to their shareholders. You will know that these companies are very well run because, they are really big companies.
Most companies, particularly smaller companies need at least a 2:1 ratio between current assets and current liabilities. That’s a great measure of liquidity. We call that the liquidity metric.
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As someone who has done long term investing for years using fanancial statements, I must say this is the best video I've seen on how to learn this stuff, it's simple, short and effective. The other metrics I use as well is Return on Invested Capital (ROIC), and debt to equity ratio.
I watch your videos all the time. You explained it much better than the graduate professors who were not really into teaching or explaining
I'm glad that I took accounting course in grade 11, last year. Thank you Phil, I learnt a lot from you on how to look at a company!
It's my 1st year studying Business, and thanks to Phil I'm not struggling as before!! Thanks, you.
Great lecture. Short, simple to the point. The length of the stream contain only such amount of information one can easily assimilate .
You are an encyclopedia. I took notes as much as I could , lots of technical words to look for . 😅
This guy's alright. Coulda saved me that $90K I spent on an MBA
and would you put in your CV youtube video course? :D
I would use my resume to highlight significant interest in the subject matter. For instance in the extra-curricular activities I could put subscribed to "Phil Town's Rule #1 investing" RUclips channel. An MBA is actually supposed to be used to show significant interest in a particular subject area with case competitions and what not. You can develop this during your spare time
dahitman55 did you land ceo job?
Most of the stuff I've learned in my degree could of been picked up from library books and RUclips videos...Schools are scams
Randy Lee
It wasn’t always like that, but yes, I have to agree at this point in time.
Like the clean concise delivery- we would all be better off if people watched this than cat videos- who knew. I’m an analyst and what is presented here is real helpful for so many people who are investing without any guidance-very good videos
Thank you so much sir. I have not seen such an exhaustive explanation ever.
you have to evaluate a company's like a bank would evaluate giving you a business loan because that's basically what you're doing you're giving the companies you invest in money to grow their business and you as the investor have to do your due diligence like a bank would do on you
That’s a smart way to look at it .. how you trade stocks right now what website you use?
very well said, spot on
This is very helpful. I owe you one Phil when you come to Kenya for Safari
I would love to visit Kenya for a Safari!
In exchange you can visit Uzbekistan for a Silk road trip
What is the different between operating cash flow and net profit.. because u saya operating cash flow is how money the company make right?
Phil seems like a good guy. Nice Presentation. -Thanks
You Sir are a awsome man sharing your wealth of knowledge.
finally found a guy who speaks my language
Thanks for watching!
visual example would have been great
First of all , thank you very very much for taking some time out and explaining the things. It's very helpful for me in understanding the concepts. I d started working in current ratio , it's been consistently as low as 0.03 to 0.06 for banks. If you can explain me why , I would be very thankful to you. Regards
I think he was saying that very big, old companies can sustain that kind of current ratio. Banks are special because, in the U.S., they're insured by the FDIC. During the financial crisis, the U.S. Government proved to the world that some of these banks were "too big to fail." So I wonder if that insurance (both explicit and implied) is a part of the reason for such a low current ratio.
1.0 is bare minimum in that for every $1 of Current assets you are able to pay for every $1 in Current liabilities. You would have thing else in Current assets to profit from.
0.03 is terrible. Thats .03 cents of Ca to Cl and it means a percentage of Current liabilities cannot be covered quickly by Current assets.
At least you're growing. Just not by very much if thats a year to year change.
nice that operating cash flow is separated from other cash flows but surprise that rate of return on assets is taken at the same level of rate of return on equity.
You explain everything clear and simple. Love this channel Phil, you’ve taught me a lot!
Great video. It rare to find a decent investing tips video on the internet these days.
I loveeee how you explain. Loved your videos. Helped me a whole lot. Thanks, Phil!
Great advice! Very well explained.
Simple and straightforward! Great video
Thank you very much sir, really valuable information.
Great presentation, this is really good stuff, Thanks Phil
Could you recommend me some books about financial statement analysisis?
Thank you for sharing, it is very enlightful.
Amazing piece of info...
Where can i find these 3 financial statements? ( Balance sheet, income statement and cash flow ?
Amazing. Thanks. What a great guy.
Awesome stuff there. I am learning. Thank you Phil .
Amazing explanation. Really very very very very good explanation
Excellent explanation thank you very much.
new subscriber, great video
Best joke from my country - Latvia.
Our bank offer 0.03% per year, so 1% is huge 😅
thanks for the video, it's help me a lot
Honestly after reading his book I made $11,000.00 off of stocks in 2017! His book is great
Cotey Speaks Finance Did you invest $1,100,000.00 that year?
helps that the stock market did ok too.
Охтеров Егор roflmao!!! Be nice
Where on a balance sheet can you find equipment purchased specifically that year?
@@itsmejeremy7 Look at the Income Statement, it should be listed as a depreciation expense
Great program, thanks
extremely useful
Thank you very much!
Thank you so much
thanks
SO AWESOME 👍
Excellent video
This video could benefit from some text and visuals
Operating cash flow - Capex = owners cash flow
well explained
Thank you!
thank you so much
Liquid gold. Thank you!
tnx!
I plan on reading his book ...Anybody read it yet ?
Question, perhaps a stupid one, but would it make sense to divide the free cash flow (instead of net income) by total assets to see how much free cash flow a company can generate on its assets, since free cash flow is the actual cash going back to the owners?
“Except we don’t want to see 1% we want to see thirty and a great company can do that”
(5:38)
Hello there, good information you provide us, thankyou for that. Would it be posible to download some statement and go through them , so we can see?
You can download the yourself Stefan
Can you do a video of 30 companies that return at least 30 per year? Would be so helpful!
good video :)
Thank you for the video. Good points but why ask people to go and look at balance sheets, cash flow statements and do the math on their own? All that stuff is already calculated for you and available for free on websites like Morningstar.
I love this guy so much!!! but omg those nails caught my eye
I wish you were my professor..
Thanks Mr Phil. I think i am on a play now
explain the difference between earnings and revenue please. I thought earnings just calculates in the liabilities.
Eric Brenner earnings = total revenue - cost of revenue
Thanks Phil for this video! I'm learning a lot and feeling empowered while investing.
Sorry what's the Fourth one may I ask?
He is talking about free cash flow. www.investopedia.com/terms/f/freecashflow.asp
He is awesome!
FedorT54 ooooo
W
*Thank You*
Dca might not give u maximum profit, but it takes zero energy to perform.
Sir, pls can you shade more light on "return on assets" ?
It sounds like it's the money you get back for your investment. "Assets" seems to include all cash and equity. Am I saying that right? So if you give your friend your lawn mower (worth $300) and $100 cash for his lawn-care business, you're into the business $400. If he pays you dividends of $100/year, you're making 25% return on assets. Someone please correct me if I'm wrong.
Use more visuals
Found it I think.
Great video! Which ratios do you think are the most important ones when picking stocks? I've found this article here www.stockmetrix.net/blog/post/070318/5-most-accurate-financial-ratios?t=gauYT#17a Do you agree with what they say there?
Bryan Cranston can really do finance stuffs
am sorry but i dont like numbers
Great video. It rare to find a decent investing tips video on the internet these days.
Thank you!
Thank you!