The investment decision and why it matters

When considering the use of investor ratios one of two images usually comes to mind.

1. A small investor using the pages of the financial press to review the performance of companies with a view to buying shares as part of a small personal portfolio.

2. A large predatory company reviewing the financial statistics of a potential target.

In both of these cases the emphasis is upon a third party, but there is another possibility that occurs so frequently that it is often forgotten. As companies grow they need cash to finance this expansion, and it is rare that trading operations alone will be sufficient to provide these funds. Irrespective of whether this cash is derived from borrowing or the issue of additional equity (i.e. shares), it is in the interests of management...