To put up a sound and profitable portfolio or trade
smartly, one should select good companies or stocks
and filter out higher risk securities. With this writing and its descriptive
video, short and long term market participants will understand
how to use Google finance to perform a swift due diligence.
What is Google finance acid test?
It is a speedy verification to check if a company will continue in business
or struggle in one fiscal year.
It compares all current assets to total
current liabilities. Though investors and traders use other ratios to pick good companies
such as the earnings yield and return on capital (ROC), this verification is very convenient
to bullish buyers (who want to buy-hold for a long period and avoid too risky financial
This fast examination is based on the current assets ratio. Companies with a higher
current assets ratio are more liquid than others, therefore may have a superior future life span.
What are current assets?
These are assets that can be quickly or readily converted into cash within a year.
They consist of stocks (inventories); cash in the bank, prepaid expenses, account
receivables and cash equivalents. The whole lot can be sold to pay current liabilities
without selling the fixed assets.
Note that in London, these assets are also called
The current assets ratio is the total current assets divided by total current liabilities.
What are current liabilities?
They are all liabilities that are to be settled in cash within the fiscal year.
Its components are the amount owed to suppliers of goods and services,
short term borrowings, current tax and VAT to pay to the government,
dividends and provisions.
Using Google finance to perform the test
1/ go to www.google.com/finance
2/ put in the search bar the epic of the company
For example for Coca Cola the epic is (KO) and for Apple stock (AAPL)
One can also use the name if one does know the epic.
3/ click on financials
4/ click on balance sheet
5/ click on annual data
6/ compare the total current assets to total current liabilities in each column.
7/ Now watch the video to understand more.
Description: How to use Google finance to
perform a quick verification if a stock or a
company is too risky to buy or invest. Know
what is the fundamental analysis acid test
and how to use it. Get started.
Description: Discover Google finance