Financial ratios

Price-to-Book Ratio for Technology Stocks Technology stocks often trade at extremely high price-to-book ratios because intangible assets—patents, software, talent, network effects—dominate book value but are invisible on the balance sheet.

Price-to-Book Ratio When Equity Is Negative Why price-to-book ratio becomes meaningless with negative equity, and what metrics analysts use instead for leveraged and buyback-heavy firms.

Price-to-Book-Growth Ratio A valuation metric that compares a stock's price-to-book premium against its expected book value growth rate, addressing whether high P/B multiples are justified.

Price-to-Cash Flow Ratio The price-to-cash flow ratio divides market capitalization by operating cash flow. It focuses on actual cash generated, bypassing earnings accounting distortions entirely.

Price-to-Cash-Flow Ratio Explained The price-to-cash-flow valuation multiple, why it is more reliable than P/E for capital-intensive firms, and how it compares to price-to-free-cash-flow.

Price-to-Distributable-Cash-Flow How to value master limited partnerships and REITs using cash available for distribution rather than accounting earnings.

Price-to-Earnings Growth The P/E ratio divided by the expected earnings growth rate, used to value growth stocks fairly relative to their growth.

Price-to-earnings ratio The price-to-earnings (P/E) ratio is the price of a stock divided by its annual earnings per share. It answers: how many dollars are investors paying for each dollar of profit? High P/Es suggest growth expectations; low P/Es suggest value or trouble.

Price-to-EBITDA Stock price divided by EBITDA (earnings before interest, taxes, depreciation, and amortization), used to value operating profitability.

Price-to-Economic-Book-Value Valuing firms using adjusted book value that includes intangibles, R&D capitalisation, and off-balance-sheet items.

Price-to-Free Cash Flow Ratio The price-to-free cash flow ratio divides market capitalization by free cash flow, which is operating cash flow minus capital expenditures. It shows what cash is actually available to shareholders.

Price-to-Free-Cash-Flow vs Price-to-Book Price-to-free-cash-flow vs price-to-book: how each valuation multiple serves asset-heavy and asset-light businesses, and which predicts returns better.

Price-to-Free-Cash-Flow vs Price-to-Earnings Understand when price-to-free-cash-flow diverges from price-to-earnings and why one metric matters more in specific accounting scenarios.

Price-to-Free-Cash-Flow-to-Equity A valuation metric that values equity directly against the cash available to shareholders after debt service and capital expenditure, rather than total-firm free cash flow.

Price-to-Net-Tangible-Assets Ratio A conservative valuation metric that divides share price by tangible book value per share, excluding all intangible assets and goodwill.

Price-to-Operating-Cash-Flow Ratio Market capitalization divided by operating cash flow; a valuation metric emphasizing cash actually generated by operations over accounting earnings.

Price-to-Owner-Earnings Ratio Warren Buffett's owner-earnings metric and how to calculate the price-to-owner-earnings ratio from financial statements as an alternative to P/E and P/FCF.

Price-to-Research Ratio Market capitalisation divided by annual R&D spending; used to value innovation-intensive firms where traditional asset-based multiples fail.

Price-to-Sales Ratio The price-to-sales ratio divides market capitalization by annual revenue. It bypasses earnings entirely, making it harder to manipulate and useful for comparing companies with vastly different profitability.

Price-to-Sales Ratio by Industry Price-to-sales ratio by industry varies sharply—from software at 3–5x to retail at 0.2–0.5x. Learn what multiples signal value or excess in your sector.

Price-to-Sales Ratio for Unprofitable Companies How unprofitable companies use price-to-sales ratios for valuation and what thresholds indicate excessive pricing for pre-profit businesses.

Price-to-Sales Ratio: When It Is Most Useful When to use price-to-sales ratio: for unprofitable companies, distressed valuations, and revenue comparisons where P/E or EV is unreliable.

Price-to-Tangible-Book Ratio Stock price divided by tangible book value per share. A stricter asset-based valuation than price-to-book, excluding intangibles.

Profit Margin Ratio A general measure of profitability: what percentage of each revenue dollar becomes profit after all expenses are paid.

Proprietary Ratio The inverse of financial leverage—shareholders' equity divided by total assets—measuring what proportion of the firm's assets owners have funded.

Purchase-to-Pay Cycle and Payables Efficiency The purchase-to-pay cycle (procure-to-pay) maps how long cash is tied up from purchase order through invoice payment. Learn to measure payables efficiency using DPO and turnover metrics.

Quick Ratio The quick ratio divides liquid assets (cash and receivables, excluding inventory) by current liabilities, measuring a company's ability to pay short-term debts from cash and near-cash assets only.

Quick Ratio for Retailers: Why Inventory Distorts the Picture Why quick ratio for retailers is essential: it excludes slow-moving inventory and reveals true short-term liquidity better than the current ratio.

Quick Ratio for Small Business How small businesses use the quick ratio to assess short-term liquidity without relying on inventory turnover assumptions.

Quick Ratio vs Cash Ratio: Which Liquidity Measure Matters More Quick ratio vs cash ratio: both measure liquidity, but quick ratio includes receivables while cash ratio includes only cash. Learn when each matters.

Quick Ratio vs Current Ratio: Key Differences Quick ratio vs current ratio difference: learn which assets each includes, when the gap matters, and what inventory liquidity problems look like.

R-Squared The percentage of a portfolio's volatility explained by its benchmark, revealing how much of its performance comes from systematic versus idiosyncratic risk.

R&D Expense as a Percentage of Revenue How to calculate and interpret R&D intensity: what the ratio reveals about innovation spending and competitive positioning across sectors.

Realised Volatility vs Implied Volatility Understand the difference between realised volatility (actual past price swings) and implied volatility (market's forward-looking forecast), and what the spread signals.

Receivables to Payables Ratio A liquidity metric comparing money a firm is owed to money it owes, measuring working-capital balance and trade-credit dynamics.

Receivables Turnover Analysis A metric measuring how quickly and efficiently a company collects cash from credit sales.

Receivables Turnover vs Days Sales Outstanding Two reciprocal metrics measuring how fast a company collects payment: receivables turnover counts annual cycles, while days sales outstanding converts to calendar days.

Retention Ratio The percentage of earnings a company reinvests in the business rather than returning to shareholders.

Return on Assets Return on assets divides net income by average total assets, showing how efficiently a company deploys all of its assets to generate profit.

Return on Capital Employed Return on capital employed divides after-tax operating profit by total capital employed (equity plus debt minus cash), measuring returns on all long-term capital.

Return on Capital Employed vs ROIC ROCE vs ROIC: both measure profit per dollar of capital invested, but differ in how capital is defined. Learn when to use each metric and how definitions affect results.

Return on Equity Return on equity divides net income by average shareholder equity, showing how much profit a company generates per dollar of shareholders' capital invested.

Return on Equity for Banks: Why It Is Interpreted Differently Return on equity for banks: explained differently due to high financial leverage, regulatory capital, and deposit-funded balance sheets.

Return on Equity for Capital-Light Businesses Why high ROE in asset-light companies (software, consulting) misleads compared to capital-intensive firms; when ROE is a strong signal and when it hides levers.

Return on Equity in Banking Why bank ROE targets (10–15%) and benchmarks differ from non-financial firms due to leverage, regulatory capital, and deposit funding models.

Return on Equity vs Return on Assets How ROE and ROA differ when debt is used, and which ratio better measures true operating efficiency versus financial returns.

Return on Incremental Invested Capital The profit generated on new capital deployed in a period, showing whether growth investment creates value or destroys it.

Return on Invested Capital Return on invested capital divides after-tax operating profit by all invested capital (equity plus debt), measuring how efficiently a company deploys all funding sources.

Return on Invested Capital Calculation With Example How to calculate return on invested capital step by step with a concrete formula, definition of invested capital, and worked example.

Return on Net Assets Net income divided by fixed assets plus working capital, measuring how efficiently a business deploys its productive asset base.

Return on Net Tangible Assets Return on net tangible assets divides net income by tangible assets minus current liabilities, measuring returns on real net asset value.

Return on Research Capital Incremental gross profit attributable to R&D spending, used to evaluate how productively a firm converts research investment into margin gains.

Return on Tangible Assets Return on tangible assets ratio: net income divided by tangible assets (excluding intangibles and goodwill), revealing true earning power of physical capital.

Return on Tangible Equity Return on tangible equity divides net income by tangible shareholder equity (excluding intangible assets and goodwill), measuring returns on real assets only.

Revenue per Employee Total revenue divided by headcount; a simple cross-sector measure of workforce productivity.

Revenue Per Employee as an Efficiency Ratio Revenue per employee as an efficiency ratio: how it's calculated, what it reveals about workforce productivity, and why it breaks down across industries and business models.

Rho (Option Greeks) Sensitivity of option price to changes in interest rates, the least-used Greek in practical trading.

ROE Industry Comparison Analysis of how return on equity varies across business sectors, reflecting capital intensity and profitability differences.

ROIC and WACC The comparison between return on invested capital and weighted average cost of capital that determines whether a company creates or destroys shareholder value.

Rolling Beta vs Static Beta Understand why a single beta number can mislead: rolling beta tracks how market sensitivity changes over time, revealing regime shifts invisible in static beta.