Ratios Omitted in AQ Financial Spreadsheet? | Alpha Quadrant by The Fifth Person

Questions › Category: Financials Quadrant › Ratios Omitted in AQ Financial Spreadsheet?

Edmund Toh asked 2 months ago

hi victor,

hope you are well.

1. may i know if there's a reason why Debt to Equity ratio has been left out in your financial analysis excel spreadsheet (downloadable on AQ website)?

2. also when looking for Debt on websites like ROIC.ai, should i be using 'Total Debt' or 'ST borrowings + LT borrowings' when calculating this ratio?

i noticed you used 'ST borrowings+LT borrowings' as total debt in your AAPL financial analysis excel spreadsheet (also downloadable on AQ website).

3. Similarly, when determining whether Cash & Marketable Securities or Debt is greater in a company, do i use 'Total Debt' or 'ST borrowings + LT borrowings' as Debt when looking for this figure on ROIC.ai?

4. finally, i also realised that Gross Profit to Assets ratio is also not on your spreadsheet (you used to highlight this ratio in Investment Quadrant). any reason for this change?

your help on this is greatly appreciated.

thanks in advance.

best,
edmund

1 Answers

0 Vote Up Vote Down

Victor Chng Staff answered 2 months ago

Hi Edmund,

U.S. companies tend to do a lot of share buybacks. This can sometimes reduce shareholders’ equity or even turn it negative, which makes the debt-to-equity ratio distorted. A better metric to look at would be debt-to-cash-flow.
Yes, total debt refers to short-term debt plus long-term debt combined.
I’m not sure how ROIC.ai calculates its debt figures, but we base our calculations on total debt.
There are too many ratios that serve similar purposes. I prefer to streamline the process and keep it lean, as having too many ratios can become overly complicated. In my view, ROIC already covers most of the important aspects.

Edmund Toh replied 2 months ago

really appreciate your clear explanation, Victor.
thank you for your swift reply as well.

best,
edmund