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What are top 5 financial ratios which are very important for any investor to know and use in evaluating investment opportunities?

Please mention the ratio name, the actual ratio and what does it signify. 

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تم إضافة السؤال من قبل Nuridin Islam Diab , Training Manager , Bbusinesss LLE
تاريخ النشر: 2016/03/30
Shamseer KM
من قبل Shamseer KM , Accounts and Admin Payroll , KBM Group

Agree with the answer of  Abdul khalique ....

Abdul Khalique
من قبل Abdul Khalique , Finance Manager , Value Real Estate & Construction

Top 5 financial ratios which are important for every investor to know and use in evaluating investment opportunities:

1.    Price-Earnings Ratio (P/E Ratio):At any time, the P/E ratio is an indication of how highly the market "rates" or "values" a business. A P/E ratio is best viewed in the context of a sector or market average to get a feel for relative value and stock market pricing.

2.    Profitability Ratios: These ratios tell us whether a business is making profits and if so whether at an acceptable rate.

3.    Return on Equity (ROE): Return on Equity measures the profitability of equity funds invested in the firm. This ratio reveals how profitably of the owners’ funds have been utilised by the firm. It also measures the percentage return generated to equity shareholders.

4.    Earnings per Share: The profitability of a firm from the point of view of ordinary shareholders can be measured in terms of number of equity shares.

 

5.    Market Value/Book Value per Share: It provides evaluation of how investors view the company’s past and future performance. This ratio indicates market response of the shareholders’ investment. Undoubtedly, higher the ratios better is the shareholders’ position in terms of return and capital gains.