Value in 60 Seconds: The best balance sheet metric - Why limit yourself? - 24 March 2023

What is the best balance sheet metric with respect to company performance? I mean, I gotta say it's capital turns, but you can break it down as far as you want. You could look at working capital, you could look at fixed assets. For a financial firm, you want to look at net investment assets ratio. That's the best one. I don't really like to restrict myself to looking just at a balance sheet metric or an income statement metric. That's why we look at return on invested capital. We look at economic earnings. We want to look at the comprehensive picture. Now, understanding why return on invested capital is moving in a particular direction by digging deeper into what might be driving that as an income statement or balance sheet, that's the direction I like to go as opposed to say, hey, I want to check out the balance sheet here. No, I want to check out everything. Because if I look at the balance sheet, it could look great. Other parts of the business could look bad. So I like to start with what's the overall business look like and then see if anything funny comes out.