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.

Things To Know

  • News and annual reports provide several stock indicators.
  • Company news helps give you an outlook on company stock.

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 stockholdersequity. 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.