1. Market Cap.
Market capitalization = PBX x Equity
2. PBV
Price to Book Value = Ticker price ÷ equity per share
3. Book Value = Equity = Assets - Liabilities
4. Equity per share = Equity ÷ total number of shares
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5. DER
Debt to Equity ratio = Debt : Equity
As always, ratio differ regarding industry sector and main target market.
DER generally considered over leveraged (on the brink of too much loan) on 2:1 ratio.
6. EBITDA
Earnings before interest tax depreciation amortization.
Indicator to compare business without distortion of tax deduction/benefit, capital structure, and asset management.
Business may perform better but looked worse on the bottom line (Earnings after tax) because of domicile, client, and other variable that incur additional or less tax.
So before delving further on suitability to be financed, EBITDA shows the core business itself whether it is generating enough earnings for additional loan.
Aside from tax, business also may benefit from parent company thus having minimum loan exposure, case of CPIN.JK (Thai subsidiary) as compared to JPFA.JK in which with less assets and maxed out loan, JPFA manage to hold similar market share to CPIN, both at 33% of day old chick (DOC) industry.
Chicken feed and frozen food contributed to revenue in much smaller percentage for both business (in the period of 2000s to 2010s).
Amortization and Depreciation may distort business performance in a way they manage their tangible assets.
A business deciding to lease most of their assets eg. Head quarters, manufacturing machines, operational vehicles may reflect differently than those who has the financial strength to make purchases and depreciate optimally for tax benefit, thus accumulating assets.
Business with lesser war coffers may have less options.
EBITDA will provide preliminary indicator for financing availability by measuring business earnings before aforementioned distortions.
