What Investment-Related Information Can You Get from Company News?

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What Investment-Related Information Can You Get from Company News?

Let’s look at some stock indicators found in the news and in annual reports to see what they really mean.

Liquidity

A company’s liquidity can be measured by taking its current assets and dividing them by its current liabilities. A company that is liquid has enough working capital to meet its obligations.

Inventory turnover ratio

Reports can also be used to determine a company’s activity level, using its inventory turnover ratio. This ratio reveals the number of times inventory is sold and replaced within a year. High inventory turnover is a sign of an efficient corporation.

Debt/equity ratio

Another ratio to examine is the company’s debt/equity ratio. This is the amount of a company’s total liabilities divided by its net worth, or stockholders’ equity. A relatively low debt/equity ratio is one sign of a secure investment.

Net profit margin

The amount of profit a company has to work with after deducting the cost of goods sold, depreciation, interest, and taxes is called net profit margin. This gives investors another indicator of a company’s operating efficiency. The amount a company is earning from the investments of its shareholders is called its return on equity. Return on equity reflects the performance, as well as the financial and operational stability, of a company.

Earnings per share

Another financial indicator, earnings per share, is obtained by dividing a company’s net profit by the number of shares it has outstanding. This is the amount, per share, by which revenues exceed expenses. Return on assets also measures a company’s profitability by dividing its annual earnings by its total assets.

Company news helps give you an outlook on company stock.