Financial Ratios - Valuation Ratios
Financial ratios can be 'somewhat loosely' classified into different categories.
1. Profitability Ratios
2. Leverage Ratios
3. Valuation Ratios
4. Operating Ratios
3.The Valuation Ratios compare the stock price of the company with either the profitability of the company or the overall value of company to get a sense of how cheap or expensive the stock is trading. Thus this ratio helps us in analyzing whether the current share price of the company is perceived as high or low. In simpler words, the valuation ratio compares the cost of a security with the perks of owning the stock.
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