If a company has an inventory turnover ratio of 2 to 1, it means that the company’s inventory turned over twice in the reporting period.  

• Operating margin compares a company’s operating income to net revenues. Both of these numbers can be found on a company’s income statement. To calculate operating margin, you divide a company’s income from operations (before interest and income tax expenses) by its net revenues, or 

Operating Margin = Income from Operations / Net Revenues 

Operating margin is usually expressed as a percentage. It shows, for each dollar of sales, what percentage was profit.  

• P/E ratio compares a company’s common stock price with its earnings per share. To calculate a company’s P/E ratio, you divide a company’s stock price by its earnings per share, or 

P/E Ratio = Price per share / Earnings per share 

If a company’s stock is selling at $20 per share and the company is earning $2 per share, then the company’s P/E Ratio is 10 to 1. The company’s stock is selling at 10 times its earnings.  

• Working capital is the money leftover if a company paid its current liabilities (that is, its debts due within one-year of the date of the balance sheet) from its current assets. 

Working Capital = Current Assets – Current Liabilities 

Saving and Investing 

Define Your Goals 

To end up where you want to be, you’ll need a roadmap, a financial plan. To get started on your plan, you’ll need to ask yourself what are the things you want to save and invest for. Here are some possibilities: 

• A home  
• A car  
• An education  
• A comfortable retirement  
• Your children  
• Medical or other emergencies  
• Periods of unemployment  
• Caring for parents  

Make your own list and then think about which goals are the most important to you. List your most important goals first.