7 Financial Ratios Every Investor Must Know | Summary and Q&A

TL;DR

Learn about the importance of financial ratios and how they can empower investors in making informed investment decisions.

Key Insights

• 🥳 Financial ratios are essential in making informed investment decisions and empowering investors.
• 🤩 Understanding key financial ratios within the same industry is crucial to compare companies effectively.
• 💐 Cash flow from operations is a valuable indicator of financial performance and should be analyzed alongside earnings growth.
• 🥳 Debt-to-equity ratio helps assess the financial health of a company and its ability to manage debt.
• 🪐 The net current asset value provides insight into a company's liquidation value and potential investment opportunities.
• 🥳 Payout ratio analysis is important for dividend investors in evaluating the sustainability of dividend payments.
• 💐 Price multiples, such as price-to-earnings and price-to-cash flows, can provide more accurate valuations compared to earnings alone.
• 💐 Enterprise value provides a comprehensive measure of a company's worth by considering its market capitalization, debt, and cash flows.

Transcript

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Questions & Answers

Q: When should I use free cash flow (FCF) instead of earnings per share (EPS) in the payout ratio calculation?

FCF can be used instead of EPS when analyzing companies with significant depreciation or when comparing companies with different capital structures. FCF provides a more accurate picture of a company's ability to cover its dividend payments.

Q: What are your thoughts on including Chinese stocks in a portfolio?

Chinese stocks should not be neglected in a portfolio because China's economic growth is expected to surpass that of the US. Investors should have direct exposure to Chinese stocks due to potential consumer backlash against foreign companies and the value opportunities in Chinese stocks.

Summary & Key Takeaways

• This livestream discusses the importance of understanding and using financial ratios for investment decisions.

• The speaker highlights the seven key financial ratios that every investor should know and understand.

• He emphasizes the need to compare ratios within the same industry and encourages investors to analyze cash flow from operations versus earnings growth.