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Well boss, there aren't any shortcuts when it comes to knowing which financial ratios to pay heed to & which ones to ignore. 18 years have taught me well. I can try to help you, if you are really serious about this. A few things to consider:

The debt to equity ratio, D/E. Like your house mortgage, if you have one, no pun intended. Do you hold 20%, 30%, or 50% equity interest in your own home?, or are you highly leveraged with little or no equity investment by yourself in your own home? It's the same with corporations. Request 3 years of annual reports, back to back to back on a company.
Go to their balance sheet & income statement section.
Under balance sheet, what is their total long & short term debt? What is their total Equity. Divide by their total assets. If the company "x" has a D/E of 40%, then they are well positioned with 60% equity in their own company. If it's like 80% debt, what would you think about how they are doing their business from day to day.

Also, look at their 'current ratio', = the company's weekly paycheck available to pay its weekly or monthly bills that are due. If current cash, not cash and accounts receivables, are like 1,000,000 and current debt is 500,000 then they are understood to have a 2:1 current ratio. A 1:1 means they are living paycheck to paycheck. A 3:1 means they are doing well, but do not know what to do with their excess cash and it's just sitting and not being put to use.

Ther's only 30 more ratios you need to master and you'll have that confidence factor that few company's will be able to fool you.

By the way, in a comp's annual reports, look in the fine print which ='s the foot notes at the bottom of every page. Do you see a disclosure for 'contingent liabilities' or impending losses for law suits the company is embroiled in? Do you want to invest in a company that appears to be losing its law suit instead of winning it? Many levels to financial analysis my fellow fool, Yes? Not just ratios. Some are straight English and simple math and your own good commonsense.

Fool on,

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