Category Archives: Financial Ratios

Price to Sales (P/S Ratio)

The price-to-sales ratio (Price/Sales or P/S) provides a simple approach: take the company’s market capitalization (the number of shares multiplied by the share price) and divide it by the company’s total sales over the past 12 months. The lower the ratio, the more attractive the investment.

Asset Turnover Ratio

Definition: The amount of sales generated for every dollar’s worth of assets. It is calculated by dividing sales in dollars by assets in dollars. Formula: Asset Turnover = Revenue / Assets Also known as the Asset to Turnover Ratio. More Detail: Asset turnover measures a firm’s efficiency at using its assets in generating sales or revenue – the Read More…

Current Ratio

Current Ratio is the ratio of current assets divided by current liabilities. It provides A liquidity ratio that measures a company’s ability to pay short-term obligations. Also known as “liquidity ratio”, “cash asset ratio” and “cash ratio”.

Quick Ratio

Quick Ratio is the ratio that measures the ability of a firm to cover its current liabilities with their most liquid current assets. Quick Ratio = (Current Assets – Inventory) / Current Liabilities

ROE: Return on your Equity

What are they doing with your money? Have you ever wondered how well your money is really being managed by the corporations you hand it over to? After all, the media is full of stories about CEO compensation reaching new heights, buy-outs of non-profitable holdings, million dollar birthday parties and other horror stories. Formula for Read More…

PE Ratio: Compare Relative Values

PE Ratio (Price-to-Earnings) is a valuation ratio that compares the price per share of a company’s stock to its earnings per share. It basically shows how much investors are willing to pay for a share given the earnings currently generated. It is also used to analyze whether a stock is overvalued or undervalued. Formula How Read More…