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📈Profitability Ratios

Price-Earnings Ratio (P/E)

Market Price per Share ÷ Earnings per Share = P/E Ratio

What It Means

How much investors pay per $1 of earnings. Higher = growth expectations.

Example

Market Price per Share:$40
EPS:$2.00

$40 ÷ $2.00

P/E Ratio = 20

→ Investors pay $20 for every $1 of earnings

Related Formulas

Profit Margin

Net Income ÷ Net Sales × 100 = Profit Margin %

Gross Margin Ratio

Gross Profit ÷ Net Sales × 100 = Gross Margin %

Return on Assets (ROA)

Net Income ÷ Average Total Assets × 100 = ROA %

Return on Equity (ROE)

Net Income ÷ Average Stockholders' Equity × 100 = ROE %

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