There are a variety of ratios that can be used when trying to make an investment decision. While looking at numbers should not be the only determining factor of your decision it is still crucial to analyze certain ratios to gain a better understanding of the stock and company’s performance. In order to better understand Square Inc.’s company health, we’ve calculated different profitability, liquidity, solvency and valuation ratios. Profitability ratios are used to give us an idea of how likely it is that a company will turn a profit, as well as how that profit relates to other important information about the company. Starting with profit margin, SQ is calculated to have a -2.84% profit margin. This means that it has a net loss of about $0.03 …show more content…
It measures a company's ability to pay off its short-term debt obligations. This is done by comparing a company's most liquid assets, those that can be easily converted to cash, with its short-term liabilities. The current ratio for SQ is 183% meaning that for every dollar in current liabilities, they have $1.83 in current assets. This tells us that SQ has the ability to pay back its liabilities as it has almost double worth of assets. Another liquidity ratio is the quick ratio. The quick ratio is a more conservative version of another well-known liquidity metric -- the current ratio. Although the two are similar, the quick ratio provides a more rigorous assessment of a company's ability to pay its current liabilities. It does this by eliminating all but the most liquid of current assets from consideration. Inventory is the most notable exclusion, because it is not as rapidly convertible to cash and is often sold on credit. Sq has a quick ratio of 183%. Another key ratio that helps to understand a company’s financial leverage is the debt to assets ratio. SQ has a 16.4% debt to assets ratio indicating that they use a relatively low amount of debt and this makes sense as we saw earlier that the company has almost double the amount of assets than it does