Home » The 4 Most Important Financial Metrics financial analysis of a company

The 4 Most Important Financial Metrics financial analysis of a company

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.

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?

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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.

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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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The 4 Most Important Financial Metrics

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The 4 Most Important Financial Metrics
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38 thoughts on “The 4 Most Important Financial Metrics financial analysis of a company”

  1. 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.

  2. 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

  3. When the freemason bankers have cash flow problems they simply ask the government to bail them out , inject money from the ripo market or make up financial instruments that no one understands which is is really a counterfeit scheme. What I look for is a time when the international bankers crash the economy and I try to mimick their diabolical scheme. They even crash great business just to buy more stocks at a basement price. Simply genius plan especially when you own the market and the system. Get a list of
    bankers, investors and politicians who are freemasons and then buy a listening devise and have a professional spy put them in the highest degree of a lodge so you can listen to their financial bust and boom strategies. Let's be honest the trillionaires are bankers and they are in the inside of it all. They are never criminalize for insider trading because they own the system. These financial occultist can report all their 90 day trades all they want to the government and it won't matter because they are always ahead of the game and can it appear as though they are simply good investors. They won't push more that a certain percentage ,not to be obvious, but they know that they will be always ahead without being noticed and when a crisis occurs like the coronavirus , wow , they are like vultures ready to reap and steal from everyone and then blaiming it on a false flag or a blown swan design
    Simply diabolical and Christ will only tolerate it and be mocked so much. A chastisement is warranted

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