a high quick ratio meaning it is worth investing in

Running head: VALE Finance Analysis

VALE Finance Analysis

Finance Analysis

1. Current and Quick Ratio

This ratio is an indication or measure of the dollar amount of liquid assets for each dollar of current liabilities. The higher the quick ratio the better the liquid position of the company. The company being investigated has a high quick ratio meaning it is worth investing in.

2. Debt to Asset and Debt to Equity Ratio

This is a measure of the company’s financial leverage. It is the ratio between the company’s liabilities and the stockholders equity. It indicates how much debt a company uses to finance its assets relating it to the value represented by shareholders equity. The debt ratio of the company indicates the company uses a lot of debts hence discourages investing in it.

3. Asset Utilization

With that asset utilization ratio, the company is worth investing in as it indicates the ratio through which the company is utilizing the assets it has in order to make a profit. The ratios can develop a profit and even the inventory of the accounts that are receivable.

4. Interest Coverage Ratio

The interest coverage ratio for the above company indicates the ability of the company to be able to meet its interest payments. An interest ratio indicates that this company is able to pay its interest payments. This indicates investing in Vale is a good idea

Return on Equity

The Return on Equity which is the ratio between the net income and the shareholders equity is an indicator or a measure of profitability. This ratio calculates the number of dollars a company is able to generate with each shareholder’s equity dollar. The ROE for the above company is ok and this is an indication that investing in it would be a good and worthy move.

5. Return on Assets

Return on assets (ROA) often calculated by dividing the net income of the company by the total assets of the company. The ROA shows the percentage of profit the company is earning in relation to the total assets the company has. It is a comparison of how much the company owns and how much it generates. A higher ROA shows the company is worth investing in. the ROA for our company indicates returns on assets is quite high.

6. Net Profit Margin

The net profit margin is the percentage of revenue that remains after all deductions that include; taxes, interest, operating expenses, and preferred stock dividends not common stock dividends have been made from the total revenue of a company. The higher the net Profit Margin, the more profitable a company is. The Net profit margin of our company suggests investing in it would be a wise decision.

7. Price/Earnings Ratio

The price Earnings ratio indicates a company’s current market price divided by the earnings gotten per share of the company. The price/earnings ratio can be used to determine if a company’s stock price is over or undervalued. The price/earnings ratio of our company (of 9.54) shows the stock is neither under or overvalued hence the stock is worth investing in. The estimates however discourage investing in the company.

References

VALE S.A. (VALE) Forecast Earnings Growth. (2017). NASDAQ.com. Retrieved 10 April 2017, from http://www.nasdaq.com/symbol/vale/earnings-growth