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Financial Ratio

Friday, May 25, 2007 | Labels: | 0 Comments |

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From big gap of time I am here, due to some unavoidable problem sit on my neck, so this long gap is here. Well! Hope so... they are over.

Financial Ratio

Don't be afraid when I write such big name "financial ratio".

Many people in market are talking about so called famous ratio P/E Ratio, market analyst as well as who don't know about it rely on it.

Then, what is actually the P/E Ratio?

P/E ratio = market price per share/
Earning per share

If earning per share is 7 and market price of share is 63 Rs. Then

P/E ratio= 63/7 = 9


9 is P/E ratio. That mean you are pay 9 times more rupees for every earned per share.

P/E ratio in more value that means company is towards good performance, while low that mean its performance is not as expected.

This is thumb rule. !!!!

When you think about any company, then P/E ratio is one of the sign to check. So first check all other factors also. Then only P/E ratio helps you. If you only rely on only P/E ratio then over valued P/E ratio cheat you and you pay more.

So please don’t rely on only P/E ratio. I am once again repeating here this ratio is only one indication about financial performance. There are another factor are also active, first check them.

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