Benjamin Graham criteria to assess the financial health of a company ; Whatever size stock you're interested in, it's important to invest in companies with strong balance sheets. Benjamin Graham used three criteria to assess the financial health of a company:
* Total debt that is less than tangible book value.
Tangible book value is defined as total assets less goodwill, other intangible assets and all liabilities.
* A current ratio greater than two.
Current ratio is defined as current assets divided by current liabilities. It is an indication of a company's ability to meet its short-term obligations.
* Total debt less than two times net current asset value.
Companies meeting this criterion are able to pay off their debts with cash and other current assets making them far more stable.
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