Introduction to Learn the Lingo--Basic Ratios

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Ratios are a common tool for relating a stock's price with some part of the underlying company's performance. We will look at several.

What you will learn

  • Earnings per Share
  • Market Capitalization
  • Profit Margins
  • Price/Earnings and Related Ratios
  • Price/Sales Ratio
  • Price/Book Ratio
  • Price/Cash Flow
  • Dividend Yield

What do you know?

Introduction to Learn the Lingo--Basic Ratios

Once you’ve learned the basics of reading financial statements (the language of business), you can learn the basic language of investing.

Ratios are a common tool investors use to relate a stock’s price with an element of the underlying company’s performance. These quick and dirty ratios can be useful in their own way, as long as you’re aware of the limitations.

But before we get to calculating any ratios, we must first cover some essential definitions.