Estimation of company‘s ratios for investment decisions: theoretical approach

Abstract

The problem of company operating estimation is considered from the point of view of potential investor: how to avoid being lost in lot of pointed out operating performance indicators, how to understand what they mean. The most important financial reports of a company are briefly described. The essential requirements for financial reports, used as a source of information for investors, are pointed out. The most widely used indicators like price-earnings ratio (P/E), cash flow management, EBITDA, ROE are reviewed. There are described indicators’ advantages and disadvantages, possibilities of application for different branches companies. There are pointed out and briefly described company operating indicators which are most suitable for many companies: incomes, free cash flow, economic value, return of equity. Company estimation also depends on investor expectations and quality of carried out analysis.