8 important financial ratios to know when analyzing a stock
8 important financial ratios to know when analyzing a stock Key points Individual stocks can be a good way to diversify your portfolio, but you’ll need to know how to analyze the underlying businesses before investing. There are several types of financial ratios to consider when looking at a stock including: earnings per share, price-to-earnings, return on equity, debt-to-capital, interest coverage, enterprise value to EBIT, operating margin and quick ratio. These ratios can help you understand a business, but they should be taken into account together to form a holistic view of a stock. 8 important financial ratios to know when analysing a stock Here are the most important ratios for investors to know when looking at a stock. 1. Earnings per share (EPS) EPS, is one of the most common ratios used in the financial world. This number tells you how much a company earns in profit for each outstanding share of stock. EPS is calculated by dividing a company’s net income by the to...