Investment, Coding and Actuary

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Ratios rattle: Price to Book, DSO and Turns

Price to Book is probably the less value ratio, with many companies nowadays do not need a lot of land and factories to make a very high-margin product. But here’s how we can do the ratio nevertheless:

EV/SE = ((Shares Out x Price) + Debt-Cash) / Shareholders’ equity

As a rule of thumb, some value investors will shun any companies that trade above 2 times book value or more.

DSO: Days Sales Outstanding is a measure how many days worth of sales the current accounts receivable (A/R) represents.

A company with a lower amount of days worth of sales outstanding is getting its cash back quicker and hopefully putting it immediately to use, getting an edge on the competition.

Step 1: Calculate Accounts Receivables Turnover

A/R Turnover = Sales for period / Average A/R for period Continue reading