The above link is one of the initial websites where I learn how to read financial statements, below is a summary of the link details
1. There are three type of financial statements, balance sheet, income statements and cash flow statements
2.Some important ratio in the balance sheet to understand the financial health of the company before investing: Current ratio, quick ratio, cash ratio, debt ratio, debt to equity ratio, net asset value per share.
3. As moolahsense only provide the current ratio, quick ratio and debt to equity ratio in its financial statements and what I used to gauge the SME companies financial health is just these three ratios, so I am only going to focus on this three ratio
(one part of the moolahsense financial sheet)Current ratio(simplified version)
- A simple ratio of current asset divide by current liabilities
- Current liabilities are debt that need to clear in the short term(in a year)
- If a company has a current ratio less then 1.0, do not invest in it
- If a company has a current ratio more then 2.0, May consider investing in it
- The higher the current ratio, the better
- The quick ratio is almost similar to current ratio except that it is assumed that the company does not sell its inventories(e.g Toyota inventory is its car) or stock, it is still able to fulfill its debt
- If the company has a quick ratio of 0.75 and below, do not invest in it
- If the company has a quick ratio of 1.25 and above, May consider investing in it
- The higher the quick ratio the better
- The debt ratio is calculated by total liabilities divided by the equity
- If the company has a debt ratio of 1.5 and above, do not invest in it
- The company should essentially have a debt ratio of 1.0, if the debt ratio is below 0.75, do consider investing in it
- The lower the debt to equity ratio the better
The above three ratios are what I used to gauge the SME companies on whether or not to fund its loan campaign, there are other factors I take into consideration before I fund a campaign but first...let me summarize my moolahsense journey so far...
9.A summary of my moolahsense journey
By now if you had read through my various post in the blog, you would have known that I dislike complex jargon and try to simplify my blog post as much as possible(also, I do not really like to write a very long post)
So with that said, let's jump straight to the bullet!
My moolahsense account breakdown as follows
The auto-allocation is definitely a bad idea(for me at least) as I always feel that one should do their own research and not entrust it with the computer(which is why I am not so hype on robo-advisor), most importantly, remember to always dyodd! (do your own due diligence!)
Conclusion: Due to a delinquent campaign, I have decided not to invest in moolahsense in the meantime and instead focus on stocks
Lastly, If you are would like to know more about crowdfunding do check out this blog which provides much interesting insight into the crowdfunding societies. Good luck with your crowdfunding endeavor!