Lesson 4 of 5 · 8 min

Five ratios to know

Ratios turn big numbers into comparisons. On their own they prove nothing; compare them with the company’s own history and with similar companies (the Peers tab).

  • P/E (price to earnings): share price ÷ earnings per share. How many rupees the market pays for one rupee of yearly profit.
  • P/B (price to book): share price ÷ book value per share. Price relative to the net assets on the balance sheet.
  • ROE (return on equity): net profit ÷ shareholders’ equity. How much profit the business makes on the money shareholders have in it.
  • Debt to equity: borrowings ÷ equity. Higher means the company relies more on loans.
  • Dividend yield: yearly dividend per share ÷ share price.

A low P/E is not automatically “cheap” and a high one is not automatically “expensive”: growth, debt and the industry all matter. GroWiser’s screener lets you filter on all five.

Quick check

1. ROE measures…
2. A low P/E on its own tells you that a share is…

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GroWiser Academy is general education, not investment advice.