Stock Market Ratios.

For better understanding, I am making it simple, Financial ratios are grouped into 5 main categories. Let’s cover each with their formulas and use cases.

Profitability Ratios – Measure earnings power

  • Earnings Per Share (EPS) = Net Profit ÷ No. of Shares

  • Net Profit Margin = (Net Profit ÷ Revenue) × 100

  • Gross Profit Margin = (Gross Profit ÷ Revenue) × 100

  • Operating Margin = (Operating Profit ÷ Revenue) × 100

  • Return on Equity (ROE) = Net Profit ÷ Shareholder’s Equity × 100

  • Return on Capital Employed (ROCE) = EBIT ÷ Capital Employed × 100

  • Return on Assets (ROA) = Net Profit ÷ Total Assets × 100

2️⃣ Valuation Ratios – Tell if stock is cheap or expensive

  • Price-to-Earnings (P/E) = Price ÷ EPS

  • Price-to-Book (P/B) = Price ÷ Book Value per Share

  • Price-to-Sales (P/S) = Price ÷ Revenue per Share

  • EV/EBITDA = Enterprise Value ÷ EBITDA

  • Dividend Yield = (Dividend ÷ Price) × 100

  • Earnings Yield = EPS ÷ Price × 100

3️⃣ Liquidity Ratios – Check short-term financial health

  • Current Ratio = Current Assets ÷ Current Liabilities

  • Quick Ratio (Acid Test) = (Current Assets – Inventory) ÷ Current Liabilities

  • Cash Ratio = Cash ÷ Current Liabilities

4️⃣ Efficiency Ratios – Measure asset utilization

  • Asset Turnover Ratio = Revenue ÷ Total Assets

  • Inventory Turnover = COGS ÷ Avg. Inventory

  • Receivables Turnover = Revenue ÷ Accounts Receivable

  • Payables Turnover = Purchases ÷ Accounts Payable

  • Working Capital Turnover = Revenue ÷ Working Capital

5️⃣ Leverage & Solvency Ratios – Check long-term risk

  • Debt-to-Equity (D/E) = Debt ÷ Equity

  • Debt Ratio = Debt ÷ Total Assets

  • Interest Coverage Ratio = EBIT ÷ Interest Expense

  • Financial Leverage Ratio = Assets ÷ Equity

Comments

New comments are not allowed.

Popular posts from this blog

How Does the Stock Market Work?

How Does the Stock Market Work? (Explained Simply) Most people hear about the stock market every day — in the news, in conversations, and even in movies. But what exactly is the stock market, and how does it work? In this post, we’ll break it down step by step with real-life examples so even beginners can understand. 1. What is the Stock Market? The stock market is a platform where buyers and sellers trade shares of companies . Companies list their shares for people to buy. Investors (like you and me) purchase those shares. The price of shares changes based on demand and supply . 📌 Think of it like a vegetable market: Sellers = Companies offering shares Buyers = Investors Prices go up if many people want the same stock (like tomatoes in high demand) and go down if people lose interest. 2. Why Do Companies Offer Shares? Companies need money to grow — for new projects, expansion, or paying off debt. Instead of borrowing from banks, they raise money from th...
Read more

What is Stock and What is Share?

  Stock vs Share: What’s the Difference? If you’ve just started learning about the stock market, you’ve probably heard the words stock and share used a lot. Many beginners think they mean the same thing — but while they’re related, there’s a small difference. In this article, we’ll break it down with simple language, real-life examples, and a quick comparison table . What is a Stock? A stock represents ownership in a company . When you buy stock, you’re essentially buying a tiny piece of that company . Example: Imagine a cake 🍰 that represents a company. The whole cake is the stock. If you own stock in Infosys , it means you’re part-owner of that company. If Infosys grows and earns more profit, the value of your stock usually increases. What is a Share? A share is one single unit of stock . Companies divide their stock into small parts called shares so people can buy and sell them easily. Example: If the cake 🍰 (stock) is cut into 1,000 slices, each slice is a...
Read more