Understanding financial metrics is critical if you want to be a good investor. You should know what they mean, what their formulas are, how they are calculated and what numbers are considered good or bad. Here are some useful articles about financial metrics, but you should check out the financial dictionary for a full list of terms.
The difference between revenue and income can be confusing, especially since the terms are often wrongly used interchangeably. For a company, revenue is the total amount of money received from customers for the sales of products and services. However, income is what remains after you subtract all costs, expenses, and … [Read more…]
The price-to-earnings (PE) ratio is the most commonly used ratio to determine if a stock is cheap or expensive relative to its earnings. It tells you how many dollars you must pay for each dollar of annual earnings. Generally speaking, a high PE ratio indicates that a stock is expensive, … [Read more…]
The PEG ratio (price/earnings to growth) is a useful stock valuation measure. It is calculated by dividing a stock’s price-to-earnings (PE) ratio with the company’s earnings growth. If you are trying to determine if a company’s stock is expensive, cheap or fairly valued, then this is one of the best … [Read more…]