Market Ratio class is for the HSC candidates or for the students of classes 11 and 12. This class is a part of HSC (11-12) [ এইচএসসি (১১-১২) ], Finance and Banking 1st paper. You can find it in the Finance 1st Paper, chapter 4, the topic name is “Market Ratio”. This class will help you in your upcoming HSC examination.
Market Ratio
What Are Market Value Ratios?
Market value ratios are financial metrics that measure and analyze stock prices and compare market prices with those of competitors and against other facts and figures. These ratios track the financial performance of public companies to understand their position in the market.
Through market value ratios, you can determine whether the stocks of a particular company are overvalued, undervalued, or rightly valued. You can also figure out the optimal prices at which the shares should be bought or sold. Other than evaluating the present share price of a public company’s stock, these metrics also help existing and potential investors to make financial decisions about investing in shares.
Various financial metrics control share prices in the stock market. For business owners as well as investors, these metrics are important to track so that they do not lose their money in wrong financial decisions.
Thus, the calculation, interpretation, and analysis of market value ratios is crucial to make the right investment at the right time.
Major Market Value Ratio Types
There are several market value ratios that provide different insights into a company’s performance. Each of these figures, individually and together, helps investors decide whether to put money in the company and, if yes, when.
Here, we will cover a few important market value ratios, with their formula and example. Whether you are a company owner or an investor, knowing these details will help you make better financial decisions.
Book Value Per Share
The book value per share is one of the most important market value ratios as it gives you an idea about the value of each share in the market. It is calculated by dividing the aggregated amount of stockholders’ equity by the number of outstanding shares.
This ratio provides a benchmark to check if the market value of each share is high or low, which can then be analyzed to make buying and selling decisions. Basically, it compares the market price and book value of a share to determine how close they are.
Of all market value ratios, the book value per share shows the relation between the book value of a company, which is the total equity excluding the shareholders’ preference shares, and the outstanding shares in the market. It is a summation of the contributed value plus operational profit and loss of a company.
Formula
The formula of book value per share is:
Book Value Per Share = (Equity share capital of the company + All reserves and surplus of shareholders) / Number of outstanding equity shares of the company
Market Ratio details:
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