STOCKS / UNDERSTAND
Understand what the
numbers actually mean.
Financial ratios and company fundamentals explained beyond textbook definitions. Start with a question. Leave with a way to think.
49 published guides · numerical examples are educational, not market data
P/E Ratio
The share price divided by earnings per share for a stated period. P/E is an equity valuation multiple, expressed in times (×).
Understand this →START HEREValuationP/B Ratio
The market value of common equity relative to its accounting book value. The per-share version divides share price by common book value per share.
Understand this →ProfitabilityROE
Return on equity measures profit attributable to common shareholders relative to their average accounting equity over the period.
Understand this →START HEREProfitabilityROCE
Return on capital employed compares operating profit before interest and tax with the average capital committed to the business.
Understand this →START HEREPer-share metricsEPS
Earnings per share allocates profit attributable to ordinary shareholders across the weighted-average shares for the reporting period.
Understand this →Balance sheet / debtDebt-to-Equity
A leverage ratio comparing a stated measure of debt with shareholders’ equity at the same reporting date.
Understand this →GrowthRevenue Growth
The percentage change in sales between comparable reporting periods.
Understand this →GrowthProfit Growth
The percentage change in a specified profit measure across comparable periods. State whether you mean operating profit, consolidated net profit or profit attributable to common shareholders.
Understand this →ProfitabilityOperating Margin
Operating income as a percentage of revenue for the same reporting period.
Understand this →ProfitabilityNet Profit Margin
Net income divided by revenue for the same period. Specify the exact profit scope, including whether minority interests are included.
Understand this →Cash flowFree Cash Flow
A commonly used cash measure: operating cash flow less capital expenditure. Definitions vary, so show the exact calculation and provider convention.
Understand this →START HEREValuationEV/EBITDA
Enterprise value divided by earnings before interest, tax, depreciation and amortisation for a specified period.
Understand this →ValuationPEG Ratio
P/E divided by an explicitly stated annual EPS growth rate, using percentage points for growth.
Understand this →ValuationPrice-to-Sales
The stock market value of common equity divided by the company’s revenue over a stated period.
Understand this →ValuationEV/Sales
Enterprise value divided by revenue, pairing the value of operating assets with the sales those assets generate.
Understand this →ValuationDividend Yield
Annual cash dividends per share divided by the current share price, expressed as a percentage.
Understand this →ValuationEarnings Yield
Annual earnings per share divided by share price. For positive earnings on the same basis, it is the reciprocal of P/E.
Understand this →ValuationMarket Capitalisation
The market value of a company’s outstanding equity shares at a stated price and date.
Understand this →ValuationEnterprise Value
A valuation measure combining equity and other financing claims, less qualifying cash and non-operating assets, to approximate the value of operating assets.
Understand this →ProfitabilityROA
Return on assets relates annual net income to the average accounting assets employed during the period.
Understand this →ProfitabilityGross Margin
Revenue remaining after cost of goods or services sold, expressed as a percentage of revenue.
Understand this →ProfitabilityEBITDA Margin
Earnings before interest, tax, depreciation and amortisation divided by revenue, using a clearly reconciled EBITDA definition.
Understand this →GrowthEPS Growth
The percentage change in earnings per share between comparable reporting periods.
Understand this →GrowthCAGR
Compound annual growth rate is the constant annual rate that connects a positive starting value to a positive ending value over a specified interval.
Understand this →Balance sheet / debtInterest Coverage Ratio
A measure of earnings available relative to interest expense, commonly using EBIT as the numerator.
Understand this →Balance sheet / debtCurrent Ratio
Current assets divided by current liabilities at the same balance-sheet date.
Understand this →Balance sheet / debtQuick Ratio
A liquidity measure comparing cash, eligible short-term investments and net receivables with current liabilities, generally excluding inventory and prepayments.
Understand this →Balance sheet / debtNet Debt
Interest-bearing debt less qualifying cash and cash equivalents, with the treatment of leases and investments stated explicitly.
Understand this →Balance sheet / debtNet Debt/EBITDA
Net debt divided by annual EBITDA on a consistently defined basis, usually expressed in times.
Understand this →Cash flowOperating Cash Flow
Net cash generated or used by operating activities during the reporting period, as presented in the cash-flow statement.
Understand this →Cash flowFCF Yield
A defined annual free-cash-flow measure divided by its matching valuation base, expressed as a percentage.
Understand this →Cash flowCapital Expenditure
Spending to acquire or develop long-lived assets, such as equipment, facilities or qualifying capitalised intangible assets.
Understand this →GrowthYoY Growth
Year-on-year growth compares a measure with the same period one year earlier, using a consistent reporting basis.
Understand this →GrowthQoQ Growth
Quarter-on-quarter growth compares a financial measure with the immediately preceding quarter.
Understand this →Balance sheet / debtWorking Capital
Broad balance-sheet working capital is current assets minus current liabilities. Operating working capital uses a narrower, explicitly defined set of operating items.
Understand this →Cash flowCFO/PAT
Cash flow from operations divided by profit after tax for the same reporting period and consolidation scope.
Understand this →EfficiencyAsset Turnover
Revenue generated during a period divided by the average total assets recorded during that period.
Understand this →EfficiencyInventory Turnover
Cost of goods sold during a period divided by average inventory measured on a comparable cost basis.
Understand this →EfficiencyReceivable Days
An estimate of how long trade receivables remain outstanding relative to credit sales, often called days sales outstanding or DSO.
Understand this →EfficiencyPayable Days
An estimate of the time taken to pay trade suppliers, commonly called days payable outstanding or DPO.
Understand this →EfficiencyCash Conversion Cycle
A working-capital timing estimate combining inventory days and receivable days, then deducting payable days.
Understand this →Per-share metricsBook Value Per Share
Accounting equity attributable to ordinary shareholders divided by the ordinary shares outstanding at the balance-sheet date.
Understand this →Per-share metricsDividend Per Share
Cash dividends attributable to each ordinary share over a stated period, with regular and special distributions identified.
Understand this →Quality / advancedPromoter Holding
The disclosed shareholding of promoters and the promoter group under the relevant Indian shareholding classification, at a stated reporting date.
Understand this →Quality / advancedPromoter Pledge
Promoter shares pledged as collateral for borrowing. Broader encumbrance disclosures can also include arrangements beyond a conventional pledge.
Understand this →Quality / advancedDilution
A reduction in an existing shareholder’s proportional ownership when the share count expands, or the potential effect of instruments that may become shares.
Understand this →Quality / advancedCapital Allocation
Management’s decisions about reinvesting cash, making acquisitions, repaying debt and returning funds through dividends or buybacks.
Understand this →Quality / advancedEarnings Quality
An assessment of how faithfully reported profit reflects sustainable business economics and how well it is supported by cash and transparent accounting.
Understand this →Quality / advancedCash Conversion
A broad description of how accounting earnings translate into cash. The exact numerator and denominator must be stated because several conversion measures are used.
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A library designed to grow.
Explore the published guides below. Additional topics will appear as they are written and reviewed.
Valuation
- P/E Ratio Published
- P/B Ratio Published
- PEG Ratio Published
- Price-to-Sales Published
- EV/EBITDA Published
- EV/Sales Published
- Dividend Yield Published
- Earnings Yield Published
- Market Capitalisation Published
- Enterprise Value Published
Profitability
- ROE Published
- ROCE Published
- ROA Published
- Gross Margin Published
- EBITDA Margin Published
- Operating Margin Published
- Net Profit Margin Published
Growth
- Revenue Growth Published
- Profit Growth Published
- EPS Growth Published
- CAGR Published
- YoY Growth Published
- QoQ Growth Published
Balance sheet / debt
- Debt-to-Equity Published
- Interest Coverage Ratio Published
- Current Ratio Published
- Quick Ratio Published
- Net Debt Published
- Net Debt/EBITDA Published
- Working Capital Published
Cash flow
- Operating Cash Flow Published
- Free Cash Flow Published
- CFO/PAT Published
- FCF Yield Published
- Capital Expenditure Published
Efficiency
- Asset Turnover Published
- Inventory Turnover Published
- Receivable Days Published
- Payable Days Published
- Cash Conversion Cycle Published
Per-share metrics
- EPS Published
- Book Value Per Share Published
- Dividend Per Share Published
Quality / advanced
- Promoter Holding Published
- Promoter Pledge Published
- Dilution Published
- Capital Allocation Published
- Earnings Quality Published
- Cash Conversion Published