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Strategies & Market Trends : Value Investing
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To: william g. hart who wrote (3701)3/31/1998 3:41:00 PM
From: Chuzzlewit   of 78645
 
Bill, the best source I know of Is Graham and Dodd's Security Analysis. But be forewarned, there are no easy roads to deciding what numbers or ratios are good or bad. As a financial analyst I look for trends, and I always try to find out if the ratios make sense in the context of the business. For example, ordinarily you might think that the higher the current ratio (current assets/current liabilities) the better. But too high a number implies inefficient use of resources. That's the same kind of thing with days in inventory (Inventory/(COGS*days in the period)). Too high a number may mean a lot of "dead" inventory and high inventory costs. Too low a number may mean that the company is losing sales because it is running out of good.

Hope this helps,

Paul
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