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Ratios: Price-Earnings Ratio (PE Ratio) definitions Flashcards

Ratios: Price-Earnings Ratio (PE Ratio) definitions
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  • Price-Earnings Ratio
    A market value ratio showing how much investors pay for each dollar of a company's earnings, calculated as market price per share divided by earnings per share.
  • Earnings Per Share
    A profitability measure found by subtracting preferred dividends from net income and dividing by the average number of common shares outstanding.
  • Market Price
    The current trading value of a single share of common stock as determined by supply and demand in the stock market.
  • Net Income
    The total profit of a company after all expenses, taxes, and costs have been deducted from total revenue.
  • Preferred Dividends
    Payments made to holders of preferred stock, subtracted from net income when calculating earnings per share.
  • Common Shares Outstanding
    The total number of shares of common stock currently held by all shareholders, used in calculating earnings per share.
  • Average Number of Shares
    A figure found by adding the beginning and ending balances of common shares outstanding and dividing by two.
  • Market Value Ratio
    A financial metric that uses market price data to assess a company's value relative to its earnings or other financial figures.
  • Investor Sentiment
    The overall attitude or expectations of investors toward a stock, influencing its market price and valuation ratios.
  • Future Earnings Projections
    Expectations about a company's potential profitability, often reflected in higher price-earnings ratios.
  • Book Value of Equity
    The net asset value of a company as recorded on the balance sheet, distinct from market price or number of shares.
  • Numerator
    The top part of a fraction or ratio, representing the market price per share in the price-earnings ratio calculation.
  • Denominator
    The bottom part of a fraction or ratio, representing earnings per share in the price-earnings ratio calculation.
  • Value per Dollar of Earnings
    An indicator of how much investors are willing to pay for each dollar a company earns, as shown by the price-earnings ratio.