Category Archives:Business

What a simple long-term solvency ratio says about Caterpillar

Financial ratios can be very helpful in measuring the performance and health of a corporation. Each year in the investing class we take a look at Times Interest Earned. As the name implies, it reveals how many times over a corporation is able to pay the interest on its long term debt. The point is that when a corporation’s profits are no longer sufficient to pay the interest, there’s likely trouble ahead, including the possibility of bankruptcy.  We usually look at and discuss the ratios for at five corporations.