Brink's Truck - Serialization - Important Financial Ratios

Published on September 12, 2004 By Jay Walker In Business

This is a serialized version of an internet book entitled:

“The Brink’s Truck Burst Open On Wall Street! A Holistic Approach to Finding The Easy Money In Common Stocks”

This book will be serialized over a several month period. It will interest people who want to know whether the price of a stock is fair, or priced too high. It will aid you in outperforming the general stock market, by helping you understand what the value is of the company that underlies its stock, and by then relating that to its stock price. However, while many of these types of books are difficult to understand, this one is written in terms that most lay people should be able to understand, rather than using obscure language and difficult to understand terminology.

Insofar as the people go, this is a work of fiction. All names in this publication are fictitious and any resemblance to any person living or dead is coincidental. Copyright 1998 and 2004 by Jay Walker. All rights reserved.

Note that this book is available in its entirety via a pdf file. A comprehensive Excel spreadsheet, beta version, is also available, which performs many of the tedious, but necessary, calculations required to analyze a company and its stock price. This spreadsheet is designed to accompany the book.

The cost is $8 for the book, and $12 for the spreadsheet (USD). Please email me at remarkablesuccess@hotmail.com to order yours.

Although this section, showing how to calculate various financial ratios, is at the end of the book, it is presented here early, in case a reader wants to use one of these ratios. The start of the serialization, Serialization 1, can be found here: Link.

Compendium of Financial Ratios

1. Return on Equity (ROE)

= Net Income / Common Equity (Average of Current and Prior year)

Or: Financial Leverage x Asset Turnover x Net Profit Margin
(see the following three equations)

2. Financial Leverage

= Total Assets / Common Equity (Average of Current and Prior year)

3. Asset Turnover

= Revenue / Total Assets

4. Net Profit Margin

= Net Income / Revenue

5. Price-earnings ratio

= Price per share / Earnings per share

6. Working Capital (not a ratio)

= Total Current Assets, minus Total Current Liabilities.

7. Gross Capital Expenditures Ratio

= Annual Capital Expenditures / Revenue

8. Net Capital Expenditures Ratio

= Annual Capital Expenditures / Net earnings

9. Dividend Yield

= Dividend Per Share / Price per Share

10. Earnings per share

= Earnings available for the common shares / Weighted average number of common shares outstanding

11. Dividends per share

= Total annual dividends paid to common shareholders / Weighted average number of common shares outstanding

12. Net cash per share

= (Cash – all claims prior to common) / Common shares outstanding at balance sheet date

13. Cash Flow per Share

= Cash Flow from operations after taxes [B / Weighted average number of common shares outstanding

14. Sales per share

= Sales / Weighted average number of common shares outstanding

15. Book value per share

= (Book value of common equity – goodwill – most other intangible assets) / Common shares outstanding at balance sheet date

16. Earnings

= Earnings per share / Price per share

17. Current ratio

= Current assets / Current liabilities

18. Quick ratio

= (Current assets – inventories) / Current liabilities

19. Cash ratio

= Cash items / Current liabilities

20. Inventory turnover

= Cost of good sold / Inventory (including LIFO reserve, if any)

21. Accounts receivable turnover

= Sales / Accounts receivable

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