To assist you in comparing companies within the same industry and gaining an understanding of managements ability to manage cash flows, please download the free excel spreadsheet and accompanying Apple Inc, 10-k Annual Report.
The purpose of the ratios is to express a relationship between two relevant items that is easy to interpret and compare with other information. Relevant relationships can exist between items in the same financial statement or between items reported in two or more different statements, so there are a number of ratios to be calculated.
The investor must give careful thought initially to choosing the ratios that express a certain relationships relevant to the area of immediate concern and must realise that a ratio by itself is meaningless. To evaluate the adequacy of a certain relationship, the ratio should be compared to the industry averages and the leader in the field.
I have highlighted specific ratios that you should add to your investment checklist, and I’ve provided reasoning why. We have used Apple Inc in all ratios to provide you with examples.
Check it out and please share with your investment friends.