Financial Ratios - Measuring Financial Health

What this video covers

• Why the quick ratio (acid test) strips out inventory while the current ratio keeps it, and what that signals about a company's true short-term survival
• How working capital ties to a current ratio above 1.0, and why a positive number is the baseline for healthy liquidity
• What total capitalization actually includes (long-term debt, preferred stock, and common equity), and the bond ratio that sits on top of it
• Why a rising debt-to-equity ratio is a red alert for bondholders, not just equity investors, because it raises bankruptcy and credit risk
• How cash flow adds back depreciation, depletion, and amortization, and why return on equity (ROE) is the headline competitiveness measure
• Why book value per share excludes intangible assets and preferred stock, and why bond interest coverage uses earnings before interest and taxes (EBIT) instead of net income
• How the price-to-earnings (P/E) ratio uses market price per share (never book value), and why the dividend payout ratio plus the retention ratio always equals 100%