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Strategies & Market Trends : The Rational Analyst
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To: Scott H. Davis who wrote (962)5/25/1998 10:10:00 AM
From: ftth  Read Replies (1) of 1720
 
Hi Scott, here's a few thoughts:
Cash Flow Coverage Ratio=Pretax CF from operations/Fixed charges.
(The higher the CFCR, the less of a burden the company's debt becomes).

For P/S and profit margin, the ratio of: Net margin/PSR is a pretty good way to compare across companies within an industry. This can be further refined to include multiple periods also (i.e. weighted composite).

For ROE and D/E, I've used a screen for D/E less than some value as part of a list of criteria, then rank the results by ROE. Yes this has some flaws, and may unfairly exclude certain companies or industries, but to take this one step further would require detailed analysis of each individual company's financials and judgement calls (very time consuming for a list of 100+ companies). I was looking for a computer-based screen, so I accept the fact that I exclude higher debt companies that may not justify being excluded.

dh
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