Market Value Ratios

The Market Value Ratios is relates the firm’s stock price to its earnings and book value per share.

The Market Value Ratios is relates the firm’s stock price to its earnings and book value per share. Market value ration also known as price per earning ratio. This ratio is used by some investors or analysts as an indicator of over- or undervaluation. If the balance sheet assets per share are much larger than the share price, this is taken to be a buy signal. Share prices significantly above net assets values might indicate over-excitement.

Price/Earnings (P/E) Ratio

=       Price Per Share    

      Earnings Per Share

Market/Book Ratio

=    Market Price Per Share  

       Book Value Per Share

Book Value Per Share   =      Common Equity    

                                        Shares Outstanding

The rate of Return on Assets (ROA)

        ROA   =   Profit Margin   X   Total Assets Turnover

                 =    Net Income      X          Sales      

                           Sales                  Total Assets

The rate of Return on Equity (ROE)

        ROE   =   ROA   X   Equity Multiplier

                 =    Net Incomes      X        Total Assets    

                       Total Assets              Common Equity

                 =   (Profit Margin)(Total Assets Turnover)(Equity Multiplier)

                 =    Net Incomes      X          Sales          X       Total Assets   

                            Sales                  Total Assets            Common Equity