You can gauge a company's receivables compared to sales by reviewing its quarterly income statement and comparing the receivables (balance sheet) ratio to sales (income).

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The balance sheet must be strong with a current ratio above 1.0 and a debt-to-equity ratio below 50%.

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One is through the wider use of convertible bonds which automatically switch into equity, bolstering the bank's balance-sheet if, for instance, its capital ratio falls below a trigger threshold.

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The result: What Parker says is "a great balance sheet, " with a cash-to-debt ratio over 2.0.

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The listed company has been cleaning up its balance sheet, bringing down the consolidated debt-to-equity ratio from 1.72 at the peak in 2009 to 0.57 this year.

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In addition, Alliance Fiber sports a debt-free balance sheet with 75 cents per share in cash, while Bookham's price-to-sales ratio is 1.6.

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First and foremost, however, we look closely at the balance sheet and make sure the company is fiscally sound, with a lean price-to-earnings ratio.

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Obviously if the derivative assets were included in the balance sheet as they are under the International Financial Reporting Standards (IFRS) rules, the price-to-book ratio would be significantly lower.

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