Advanced · A12
Reading a Company’s Numbers
Five numbers behind company-results headlines: profit margins, when debt is due, interest coverage, return on equity and return on invested capital. Each one is worked through on an invented bakery, with what it means, where to find it and what it cannot tell you. The goal is to understand what your funds hold, not to pick stocks.
By the end of this module, you’ll be able to:
- Work out a company’s margins from its income statement.
- Find when a company’s debt comes due.
- Work out interest coverage and explain how much room operating profit provided that year.
- Explain what return on equity measures.
- Explain why return on equity and return on invested capital can differ.
- Say what each of these numbers cannot tell you.
5 lessons · about 30 minutes
- 1How much of each sale a company keeps: profit margins
- 2When a company’s debt has to be repaid
- 3Whether it can comfortably pay its interest
- 4What it earns on the owners’ money: return on equity
- 5What it earns on all the money invested: return on invested capital, then Reading a Company’s Numbers in one page + a quick check
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