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-Which ratios have you heard of before this course? -Which ratios are more important to you as you start to invest now or in

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Answer #1

1) Price-to-Earnings Ratio (P/E)

The formula: P/E Ratio = Price per Share / Earnings Per Share

2) Price-to-Sales Ratio

The formula:   Price-to-Sales Ratio = Price per Share / Annual Sales Per Share

3) Dividend Yield

The formula:     Dividend Yield = Dividend per Share / Price per Share

4) Return on Equity (ROE)

The formula: Return on Equity = Net Income / Average Stockholder Equity  

Financial ratios express relationships between financial statement items. Although they provide historical data, management can use ratios to identify internal strengths and weaknesses, and estimate future financial performance. Investors can use ratios to compare companies in the same industry. Ratios are not generally meaningful as standalone numbers, but they are meaningful when compared to historical data and industry averages.

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