Topics
1. Profitability Ratios
• Gross Profit Margin, Operating Profit Margin, and Return on Assets (ROA) help assess how efficiently the company generates profits from its assets and operations
• Key Insight: High capital investments in R&D or production facilities require strong profitability management to ensure long-term success
2. Liquidity Ratios
• Current Ratio and Quick Ratio help determine a company’s ability to cover short-term obligations
• Key Insight: Liquidity is critical in managing ongoing capital requirements, especially when government payments (defense) or raw material price fluctuations (chemicals) affect cash flow
3. Leverage Ratios
• Debt-to-Equity and Interest Coverage Ratios provide insight into the company’s reliance on debt and its capacity to service it
• Key Insight: Both industries frequently use leverage for large capital projects. Managing debt levels is crucial for financial stability
4. Efficiency Ratios
• Inventory Turnover and Asset Turnover measure how effectively the company is managing its resources
• Key Insight: Efficient asset utilization and inventory management are essential in industries with long production cycles and expensive assets