Quick trick to find companies with solid balance sheets.

A repeatable way to grow long-term wealth is focusing on companies with good fundamentals. Here are two clues to quickly short through a list of companies.

First clue:

Company has a large cash balance and relatively little or no debt.

Example: Apple
In 2013 Apple had nearly 10 times more cash than debt. With that much cash relative to the amount of debt Apple was in a secure position financially no matter what happened in the markets.

Second clue:

The company earns plenty of cash to pay all expenses and debt payments. Companies usually have more debt than cash (to use leverage to increase returns and such) but if the business is so great that it earns many times the debt payments there is little to worry about.

Example: Walmart
With $9 billion in cash and $75 billion in debt this looks scary at first glance. Walmart is a giant business with $500 billion in annual sales and generates tons of free cash flow every day. After paying all expenses, taxes and debt payments it has eight times earnings-debt payments left over to make additional debt payments.

Start using these quick tricks today to narrow the list of companies you must research for long term wealth generation.

Disclosure: I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. The information provided should NOT be considered advice. The topics discussed are risky and have the potential to lose a substantial amount. I am not an investment professional and therefore do not offer individual financial advice. Please do your own research before investing.