Home › Blog
Blog: stock research and investing, explained
Plain-English guides with worked examples: how to read financial statements, value a business, use technical indicators and manage risk. See the complete Financial knowledge series →
All 154Market basics 15Trading and market structure 16Reading financial statements 15Ratios and business quality 15Valuation 15Advanced valuation and methods 15Technical analysis 15Portfolio, risk and behaviour 15Economy, sectors and the calendar 22Commodities 2Forex 5Hedge funds 3Rates and macro 1
Ratios and business quality · 5 min read
Dividend payout ratio and dividend sustainability
The payout ratio shows what share of profit or free cash flow a company pays out as dividends. Learn the formulas, how t...
Ratios and business quality · 5 min read
Days sales outstanding and the cash conversion cycle
The cash conversion cycle counts the days between paying for inputs and collecting from customers. Learn DSO, DIO, DPO a...
Ratios and business quality · 5 min read
Asset turnover and inventory turnover
Turnover ratios show how efficiently a company uses its assets and inventory to generate sales. Learn the formulas, days...
Ratios and business quality · 5 min read
Operating leverage: why profits swing more than sales
Operating leverage explains why a small change in sales can cause a large change in operating profit. Learn the formula,...
Ratios and business quality · 5 min read
Economic moats: the five sources of durable advantage
An economic moat is a lasting competitive advantage that protects profits. Learn the five main sources, how to spot evid...
Ratios and business quality · 5 min read
WACC and the cost of capital explained
WACC is the blended rate a company must earn to satisfy both lenders and shareholders. Learn the formula, a worked examp...
Ratios and business quality · 5 min read
ROIC explained: how well a business turns capital into profit
ROIC measures the after-tax operating profit a business earns on the capital invested in it. Learn the formula, how it c...
Ratios and business quality · 5 min read
Return on assets (ROA) explained
Return on assets shows how much profit a company earns from everything it owns. Learn the formula, typical differences b...
Ratios and business quality · 5 min read
Return on equity (ROE): what it shows and how leverage distorts it
Return on equity measures profit earned per dollar of shareholder capital. Learn the formula, the DuPont breakdown, and...
Ratios and business quality · 5 min read
Current ratio and quick ratio: short-term safety
The current ratio and quick ratio test whether a company can pay its bills over the next year. Learn the formulas, a wor...
Ratios and business quality · 5 min read
Interest coverage ratio: can profits pay the interest?
The interest coverage ratio shows how many times operating profit covers interest expense. Learn the formula, rules of t...
Ratios and business quality · 5 min read
Net debt to EBITDA: years of earnings needed to repay debt
Net debt to EBITDA estimates how many years of operating earnings it would take to pay off a company's debt. See the for...
Ratios and business quality · 5 min read
Debt-to-equity ratio: how to judge a company's borrowing
Learn how the debt-to-equity ratio is calculated, what counts as a high or low reading, and why book equity can make the...
Reading financial statements · 5 min read
Stock-based compensation and share dilution
Paying employees in stock is an expense with no cash outflow, and it can dilute owners. Learn how to measure it and judg...
Reading financial statements · 5 min read
Deferred revenue: cash received before the work is done
Deferred revenue is a liability for money collected before a product or service is delivered. Learn how it turns into re...
Reading financial statements · 5 min read
Goodwill and intangible assets: what is really on the balance sheet
Goodwill and intangibles often make up a big part of assets after acquisitions. Learn how they are created, tested for i...
Reading financial statements · 5 min read
Depreciation and amortization: non-cash charges that matter
Depreciation and amortization spread the cost of long-lived assets over time. Learn how they work, why they are non-cash...
Reading financial statements · 5 min read
Working capital explained: inventory, receivables and payables
Working capital is the cash tied up in day-to-day operations. Learn how receivables, inventory and payables work, and wh...
Reading financial statements · 5 min read
Capital expenditure (capex): maintenance vs growth spending
Capex is the money a company spends on long-lived assets. Learn where to find it, how maintenance and growth spending di...
Reading financial statements · 5 min read
Operating cash flow vs net income: spotting the gap
Net income and operating cash flow often differ. Learn why the gap appears, which causes are harmless, and which persist...
Reading financial statements · 5 min read
Free cash flow explained and why investors prize it
Free cash flow is the cash a business generates after paying to keep and grow its assets. Learn the formula, the variati...
Reading financial statements · 5 min read
Earnings per share: basic vs diluted
Learn how basic and diluted earnings per share are calculated, how options and convertibles change the share count, and...
Reading financial statements · 5 min read
EBIT vs EBITDA: what each shows and what EBITDA hides
EBIT and EBITDA both measure operating profit, but EBITDA ignores the cost of using up assets. Learn the formulas, the v...
Reading financial statements · 5 min read
Gross, operating and net margin explained
Learn how gross, operating and net margins are calculated, what each reveals about a company's costs, and why comparison...
Educational only, not financial advice.