Understanding Financial Statements
Understanding financial ratios and metrics is key to being a more informed investor. After all, reading numbers and lines on a 10-K or 10-Q doesn’t give you much substance, unless you can properly understand, apply, and compare them. This is where the quantitative standpoint of fundamental analysis comes in. Knowing the following financial ratios will give you a more fair and accurate assessment of the financial health of a business.
Here are the most important financial metrics and ratios you should be paying attention to:
Price-Earnings Ratio (P/E Ratio)
Return on Equity
Market Capitalization or Market Value
EV / EBITDA
Extracting financial data from corporate financial statements seems daunting, but you don’t necessarily need to do all the work yourself! Websites like Yahoo Finance have these metrics and ratios all summarized and laid-out cleanly on their pages — just search up the company!
Final Tips and Tricks
Here are some last pieces of advice for your investing journey: