Ratios
12 terms · each links to a full explanation with a worked example and the exam traps
- Basis pointOne-hundredth of one percentage point — the standard unit analysts use to describe small, exact changes in margins, yields and interest rates without ambiguity.
- CLTV/CAC ratioCustomer Lifetime Value divided by Customer Acquisition Cost — how many rupees of customer revenue a start-up buys for every rupee it spends winning that customer.
- Dividend Payout RatioDividend per share divided by earnings per share — the share of profit a company hands to shareholders rather than ploughing back into the business.
- DuPont analysisBreaking return on equity into net profit margin × asset turnover × equity multiplier, to see whether ROE comes from profitability, efficiency or borrowing.
- Forward P/EA P/E ratio using the sum of the next four expected quarters' EPS as the denominator, instead of past results — a forecast-based way to judge whether a stock looks cheap or expensive.
- Interest coverage ratioEBIT divided by interest expense — how many times operating profit covers the interest bill. Below 1, the business is not earning enough to pay its interest.
- P/E ratioShare price divided by earnings per share — how many rupees investors pay for each rupee of earnings. The most common relative valuation measure.
- Piotroski scoreA discrete score from 0 to 9, built from nine criteria on a company's financial statements, used to filter for financially strong value stocks — nine is the best score, zero the worst.
- Quick ratioCurrent assets excluding inventory, divided by current liabilities — a stricter liquidity test than the current ratio, because inventory cannot reliably be turned into cash in a hurry.
- Return on Capital EmployedOperating profit as a percentage of all the capital in the business, equity and debt together — the return the enterprise earns before any question of how it was funded or taxed.
- Return on EquityProfit after tax as a percentage of shareholders' net worth — what the company earned on the money its owners have left in it.
- Total adjusted debtThe debt figure used as the numerator of the Debt/Equity ratio: every interest-bearing liability, short or long term, plus pension deficit gaps and convertible instruments.