Thursday, June 21, 2012

Value Indicators: Capital Structure

In this indicator, we want to see long term debt (LTD) including preferred stock be less than 50% of total capitalization.

In Verdasis, set up an analysis template and pull four pieces of financial statement information, all from the balance sheet:
  • Redeemable Preferred Share Stock,
  • Preferred Stock - Non Redeemable, Net,
  • Total Debt,
  • Total Equity.
All items are for the current annual period or Y.

Apply the template to the portfolio and export to the spreadsheet application of your choice.  The formula is:

=(F2+G2+H2)/(F2+G2+H2+I2)
 
Where the F and G column are the two preferred stocks line items, H2 is total debt; all of which is divided by the sum that makes up the total capitalization.

The Rating formula is:

 =if(J2<50%, 1, -1)

You can see the spread sheet here.

Thanks for reading, be back early next week.
 

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