Empower Your Investment Journey
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Your Guide to Smart Investing
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Understanding Financial Metrics
Key Accounting Terms for Investors
Stock P/E (Price-to-Earnings Ratio): Indicates how cheap or expensive a stock is. Lower values suggest cheaper stocks.
ROCE (Return on Capital Employed): Measures how well a company utilizes its assets. Higher values indicate better performance.
ROE (Return on Equity): Shows how efficiently a company converts equity into profits. A higher ROE (15-20%) is generally favorable.
Cash Conversion Cycle: The number of days it takes to convert inventory into sales. Shorter cycles are preferable.
Operating Profit/EBITDA: Total profits minus production and indirect expenses. A higher operating profit indicates efficiency.
OPM (Operating Profit Margin): Profit per item sold. High margins, like those in software companies, are ideal.
Debtor Days: The time taken to receive payments from customers. Fewer days are better.
Price to Book: Compares share price to book value. Higher values may indicate overvaluation.
Net Debt: Cash remaining after all debts are paid. Indicates liquidity.
Equity: Assets minus liabilities. Represents shareholder ownership.
Debt to Equity: Ratio of total liabilities to shareholder equity. Helps assess financial leverage.
Understanding these terms will help you make better investment decisions and identify potential red flags in companies.