Desktop Stock Ticker | Only 4 Ratios

Only 4 Ratios

if you could only have four ratios to evaluate a company what would they be? This is a fun question that is popular in investing circles. For a laugh I’ll take my shot at it, what would you pick?


1) Current Ratio

Current Assets / Current Liabilities

Why?

This ratio keeps track of the company’s ability to pay its short term debt. If a company doesn’t have safety money to deal with debt then they might not be in business tomorrow and I don’t need any of that.

2) Dividend Yield

Annual Dividend Per Share / Price Per Share

Why?

As a buy and hold investor I like to get paid to hold the investments. A nice yield makes for a little reward for patience.

3) Dividend Payout Ratio

Dividends/Net Income

Why?

Getting a great yield now is perfect, but how can you be sure that this dividend won’t get canceled as soon as you buy the stock tickers- you don’t. One way of keeping an eye on this is to look at the payout ratio. If too much of the income is being eaten up with a dividend then beware that dividend might get cut or at least it sure isn’t going to increase in the near future.

4) Dividend Growth Rate

Why?

If a company increases its dividend on a regular basis the returns over the long term can be jaw dropping. The future of a dividend can be more important than the present.

So how about you, if you only had four ratios what would you use?

This article was written by buyingvalue. If you enjoyed this article, please vote for it by clicking the Buzz Up! button below.

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