As part of our continuing series on Understanding Financial Statements and Ratios, we turn to the balance sheet to look at a company’s liquidity, or whether it has the resources to pay its bills. We’ll calculate Net Working Capital, the Current Ratio and the Quick Ratio to see how well the company can cover current obligations with current assets.
Knowing your risk tolerance is important to help you make sure that your investments are appropriate to your personal situation as well as to your emotional comfort level. Learn the basics of choosing the right investments for you, and how to adjust your investments when your personal preferences don’t match your financial situation.
When assessing whether you would like to invest in a company’s stock, you can learn a lot about a company’s health and continuing viability by looking at operating cash flow and free cash flow. We’ll be diving in to the Statement of Cash Flows for Part 2 of our series on Understanding Financial Statements and Ratios.