How to use ratios to predict company’s future development

Abstract

In this article, I wrote about several ratios like current ratio, ROA, ROE, EVA and so on. Based on those ratios, I looked for those companies’ future development. Besides, I chose 5 companies to compare their different ratios and decide whether they can earn money or loss money. Last but not the least, I have found some solutions to the company that are losing money or having a bad future. Before reading this article, I will introduce some terms to help you to know it better. The first one is ROE (Return on Equity), which is considered a measure of how effectively management is using a company’s assets to create profits. The another one is EVA (economic value added), which a measure of a company's financial performance based on the residual wealth calculated by deducting its cost of capital from its operating profit, adjusted for taxes on a cash basis.