<p>You could probably get a very good idea of a company's ability to spend money - that is, make capital investments, develop new ventures etc. - by investing its balance sheet and develop both liquidity and leverage ratios. High liquidity with low leverage means that a company is probably not investing enough. Low liquidity with high leverage ratios would indicate a company has already invested heavily and is not in a position to undertake new ventures etc. </p>

<ul>
<li><p><a href="http://www.investopedia.com/articles/investing/080113/understanding-leverage-ratios.asp" rel="nofollow">Here is a good introduction to leverage ratios</a> </p></li>
<li><p><a href="http://www.investopedia.com/university/ratios/liquidity-measurement/" rel="nofollow"> Here is a good introduction to liquidity ratios</a> </p></li>
</ul>

CC BY-SA 3.0
2015-01-21T04:59:08.803Z
2015-01-21T04:59:08.803Z
123
<p>what are the parameters which will affect a company ability to buy a new product based on its current financial situation.  Is there any metrics or ratios which will tell the current company purchasing power? </p>

CC BY-SA 3.0
2015-01-21T05:46:33.557Z
This question seems to be more of an accounting question than an economic question.
Jamzy
CC BY-SA 3.0
2015-01-21T07:09:41.000Z
newbie to economics..actually a CS major...I thought economics is superset  of finance...
alias_neo92
<applied-econometrics><corporate-finance><purchasing-power-partity>
Ratios to determine company's current purchasing power
alias_neo92
# Ratios to determine company's current purchasing power

(Asked by: username_0 on 2015-01-20)

what are the parameters which will affect a company ability to buy a new product based on its current financial situation. Is there any metrics or ratios which will tell the current company purchasing power?

**Tags:** applied-econometrics, corporate-finance, purchasing-power-partity

> **Comments:**
> **username_1**: This question seems to be more of an accounting question than an economic question.  
> **username_0**: newbie to economics..actually a CS major...I thought economics is superset  of finance...  

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## 1 answers

### Answer by username_2 on 2015-01-21. Score: 0 | Accepted answer

You could probably get a very good idea of a company's ability to spend money - that is, make capital investments, develop new ventures etc. - by investing its balance sheet and develop both liquidity and leverage ratios. High liquidity with low leverage means that a company is probably not investing enough. Low liquidity with high leverage ratios would indicate a company has already invested heavily and is not in a position to undertake new ventures etc.

* [Here is a good introduction to leverage ratios](http://www.investopedia.com/articles/investing/080113/understanding-leverage-ratios.asp)
* [Here is a good introduction to liquidity ratios](http://www.investopedia.com/university/ratios/liquidity-measurement/)


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