Financial Ratios before picking a stock

http://www.buzzingstocktips.com/2010...ing-stock.html

Current Ratio: Gives a sense of comfort, that company is not in any short term liquidity problem. Should be at least greater than 1
Interest Coverage Ratio : It gives a fair indication of whether the company will be able to pay off its debt properly. For example, companies like Suzlon have a very low Interest coverage ratio suggesting they are in a fairly bad position.

Net Profit Margin: Varies from industry to industry. If companies increase their profitability margin over years it may be because they would have improved their operational efficiency, paid off their debt etc.Increasing NPM is a very good sign

Return On Equity: A ratio which Warren Buffet strongly believes upon. It is the return which the equity investors get for their investment on the book value. If the return on equity is consistently higher, then the stock returns will be very good. Dont pick stocks which have ROE less than 5%

Debt Equity Ratio: Leverage is a double edged sword. Increasing debts with no proper strategy for increasing the sales/profitability or huge debts for an acquisition which fails subsequently are all some warning signs of a sinking ship.