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Value ratios

Value ratios - like earnings per share, price/earnings ratio, the price/cash ratio, dividend yield, book value per share, market value per share, and the market/book ratio show company’s economic level in the market when comparing it to others. These ratios are important for the investors who think about company’s future plans, growth abilities and most important - ability to earn.

Earnings per share ratio show how much of earned profit is distributed to shareholders for one share. This ratio is very important when evaluating and comparing different companies’ shares and their profitability in the market. Price to earnings show how much investor should to pay for earned profit in the company. Investors are inclined to invest when the ratio is lower, but with high perspectives of growth, because it shows that the price of share is still low, but earnings are high. Investors are investing in those shares with high P/E ratio, where are perspectives of fast growth. Higher P/E shows higher price and greater value of shares for shareholders.

The other ratios show other types of value of the company - dividend yield shows the profitability from the shares and book value shows the value of the share, if the company would go bankrupt. It evaluates the value, which would be earned after selling assets of the company for its balance value and after paying liabilities. Value ratios generally show for the investor how valuable the company is, and what are the future perspectives of profitability growth for the share price and earnings of it.