Most Important Ratios That Every Investor Must Know

Most Important Ratios That Every Investor Must Know

Evaluating a company before investing is the most important task and also difficult one. It requires in-depth reading of financial reports such as balance sheets etc. From these ratios, you can select the right company to invest in. Let's take a look at these ratios one by one.

Earnings Per Share EPS is determined annually and quarterly. It is measured by dividing the net profit of a company that it has made divided to the total share of a company. If a company's EPS is high, there are more chances of getting success in it. Try to check the company's EPS for at least 5 years.

The PE ratio is the most used ratio in investing. A high PE means investors are paying high for shares in a particular firm. It is easy to find a share cost which is the closing price of a stock.

Price to Earnings Ratio

Debt to Equity

The DE ratio measures the relationship between the capital amount that has been borrowed and the capital amount contributed by shareholders. If DE increases, it becomes risky as it shows an organization is utilizing leverage and may have a weak equity position.

Reference For Complete Information If you want to know more in detail about the other important ratios and ways to calculate them, click here.

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