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This group is for those who have questions concerning financial statements. It is also for seasoned investors who wish to share insight on what they are looking for in sector specific financial statements. No 2 financial statements are the same and I hope the members of this group will help all of us to understand certain sectors a little better.

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financial statements 101 Forum > What do you look for?
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kcty

Member since: May 08

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Age: 30's
San Antonio, TX
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I was curious what others look for in financials as far as ratios. What are some good guidelines. Such as a company should have 1-3 debt to equity...etc. Thanks for any input given.

 Debt to equity

P/E

Inventory turnover

Operating margins

Working capital

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joann333

Member since: Apr 08

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I am a fairly new trader in penny stocks. Here are the ratios I am using:

P/E <15

P/CF <8

P/S <1.5

P/B <1.5

DCR -  at least 1.2

Debt to Capt <33%

I picked up this criteria from my readings. I must admit that I do not understand what it all means.

Any insight anyone can give would be most appreciated.

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slt

Member since: Dec 07

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Grand Rapids, MI
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I am not going to try to explain any of these myself, becaue I would probably botch it.  2 of my favorite sites for learning about these types of things are Investopedia.com and Yahoo!Finance.  They both have excellent glossaries that can give decent explanations of what these terms and ratios mean.  One thing that I have learned since I started researching stocks a couple of years ago is that these numbers and ratios can vary between different industry groups, so it may be beneficial to compare them to industry specific averages rather than look for an absolute numbe.  For example a company with a P/E (price to earnings ratio) of 25 may still  be a good buy if the industry average is much higher than that, as long as the other fundamentals are good.  Another good resource is Investor's Business Daily, which has established many criteria to look for in leading stocks based on fundamental analysis.
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1958tiger

Member since: Dec 08

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I like to find stocks off there highs by over 50% ,with macd switching on at least double the average daily volume, while crossing 2 or more sma averages, all backed by 1yr and 5yr growth rates of at least 20% and a share price no more than 1 1/2 x book. The higher volume usually translates to a higher gap up.