Here are some key of these 5 financial ratios that you should | Humble Trader's Diary️

Here are some key of these 5 financial ratios that you should see before buying anything.

1. P/E (Price to Earnings )
- The price-to-earnings (P/E) ratio relates a company's share price to its earnings per share.
- A high P/E ratio could mean that a company's stock is overvalued, or else that investors are expecting high growth rates in the future.

2. P/ BV (Price to Book Value)
- The P/B ratio measures the market's valuation of a company relative to its book value.
- The market value of equity is typically higher than the book value of a company,

3. D/E (Debt to Equity)
- The debt-to-equity (D/E) ratio compares a company’s total liabilities to its shareholder equity and can be used to evaluate how much leverage a company is using.
- Higher-leverage ratios tend to indicate a company or stock with higher risk to shareholders.

4. ROE (Return on Equity)
- Return on equity (ROE) is the measure of a company's net income divided by its shareholders' equity.
- ROE is a gauge of a corporation's profitability and how efficiently it generates those profits.

5. ROA (Return on Assets)
- Return on assets is a metric that indicates a company's profitability in relation to its total assets.
- ROA can be used by management, analysts, and investors to determine whether a company uses its assets efficiently to generate a profit.

These 5 ratios will aid your understanding of a business. They could help you pick the best stocks for your portfolio, build your wealth and even have fun doing it. I briefly highlighted five of the most common and basic ones. Be sure to also research management and read what they’re saying about a business. Sometimes the things that can’t be easily measured matter most for the future of a business.