Posted in Finance, Accounting and Economics Terms, Total Reads: 637
It is a ratio which indicates the financial performance indicator where both the numerator and denominator are metrics for the performance of the firm. Generally, the numerator is greater than the denominator while finding the ratio. This is used as a benchmark and reference to get the exact picture of a firm based on minimal understanding of the metrics of the firm. The ratio enables a stock analyst to get the big picture of a firm within minimum time and better understanding of the stock available for sell or buy. Basically, multiple is the financial indicator as follows:
For example, if the price of a stock is $10 while the earnings for that stock is $ 2. Then the P/E ratio represents the financial performance of the firm which is 10. The P/E ratio is a performance indicator for the stock on analysis. With this analysis, one can assess the stock market via approachable and better understandings. We can understand the stock output using such kind of simple analysis.