Learn Before Invest

Financial literacy is the foundation of smart investing. Our platform offers guides, courses, and insights to help you understand market concepts, risks, and strategies before you put your money at stake.

Courses

Free resources to build your investing foundation

Income Investing

Build stable cash flow with dividends and interest.

What you'll learn

  • Key concepts and frameworks
  • Practical examples & charts
  • Actionable takeaways
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Stock Investing

Master fundamentals to pick long-term winners.

What you'll learn

  • Key concepts and frameworks
  • Practical examples & charts
  • Actionable takeaways
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Stock Trading

Learn technicals and strategies for active trading.

What you'll learn

  • Key concepts and frameworks
  • Practical examples & charts
  • Actionable takeaways
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Click 'Open' to download the course material in DOCX format.

Tips & Formulas

37 essential financial metrics every investor should know

Valuation Ratios

Definition: Market capitalization growth measures how much the total market value of a company's outstanding shares has increased over a specific period. It reflects investor confidence and business expansion.

Market Cap = Share Price × Total Outstanding Shares
Example: If a company's market cap was Rs. 50 billion last year and is now Rs. 65 billion, its market cap growth is ((65 - 50) / 50) × 100 = 30%.

Definition: Enterprise Value represents the total value of a company, including both equity and debt, minus cash. It is considered a more comprehensive measure than market cap alone because it accounts for what an acquirer would actually pay.

EV = Market Cap + Total Debt − Cash & Cash Equivalents
Example: A company with a market cap of Rs. 100 billion, Rs. 30 billion in debt, and Rs. 10 billion in cash has an EV of 100 + 30 - 10 = Rs. 120 billion.

Definition: The last close price is the final price at which a stock traded during the most recent trading session. It serves as a reference point for the next trading day and is widely used in calculations for technical and fundamental analysis.

Example: If XYZ Corp's shares last traded at Rs. 245.50 before the market closed yesterday, the last close price is Rs. 245.50.

Definition: The Price-to-Earnings ratio shows how much investors are willing to pay per rupee of earnings. A high P/E may suggest the stock is overvalued or that investors expect high growth, while a low P/E may indicate undervaluation or slow growth.

P/E Ratio = Share Price / Earnings Per Share (EPS)
Example: If a stock trades at Rs. 100 and its EPS is Rs. 10, the P/E ratio is 100 / 10 = 10. This means investors pay Rs. 10 for every Rs. 1 of earnings.

Definition: Forward P/E uses expected future earnings rather than trailing earnings. It provides a forward-looking valuation and helps investors assess whether a stock is cheap or expensive relative to its anticipated profitability.

Forward P/E = Share Price / Estimated Future EPS
Example: If a stock trades at Rs. 150 and analysts estimate next year's EPS at Rs. 15, the forward P/E is 150 / 15 = 10.

Definition: The Price-to-Sales ratio compares a company's stock price to its revenue per share. It is useful for valuing companies that do not yet have positive earnings, such as growth-stage firms.

P/S Ratio = Share Price / Revenue Per Share
Example: If a stock trades at Rs. 200 and its revenue per share is Rs. 50, the P/S ratio is 200 / 50 = 4. Investors are paying Rs. 4 for every Rs. 1 of revenue.

Definition: The Price-to-Book ratio compares a stock's market value to its book value (net assets). A P/B below 1 may suggest undervaluation, while a high P/B could indicate the market expects strong future growth.

P/B Ratio = Share Price / Book Value Per Share
Example: If a stock trades at Rs. 80 and its book value per share is Rs. 40, the P/B ratio is 80 / 40 = 2.

Definition: Similar to P/B, but excludes intangible assets like goodwill and patents. It provides a stricter measure of how the market values a company's hard, physical assets.

P/TBV = Share Price / Tangible Book Value Per Share
Example: If a stock trades at Rs. 90 and tangible book value per share is Rs. 30, the P/TBV is 90 / 30 = 3.

Definition: This ratio compares a stock's price to the free cash flow it generates per share. Free cash flow is the cash remaining after capital expenditures, making this ratio a strong indicator of a company's real value-generating ability.

P/FCF = Share Price / Free Cash Flow Per Share
Example: If a stock trades at Rs. 120 and its free cash flow per share is Rs. 12, the P/FCF ratio is 120 / 12 = 10.

Definition: This ratio compares a stock's price to its operating cash flow per share. Operating cash flow focuses on cash generated from core business operations, excluding investing and financing activities.

P/OCF = Share Price / Operating Cash Flow Per Share
Example: If a stock trades at Rs. 100 and operating cash flow per share is Rs. 20, the P/OCF ratio is 100 / 20 = 5.

Definition: The PEG ratio adjusts the P/E ratio by accounting for the company's expected earnings growth rate. A PEG below 1 is generally considered undervalued, while above 1 may be overvalued relative to growth.

PEG = P/E Ratio / Annual EPS Growth Rate (%)
Example: A company with a P/E of 20 and an expected earnings growth rate of 25% has a PEG of 20 / 25 = 0.8, suggesting it may be undervalued relative to its growth potential.
Enterprise Metrics

Definition: EV/Sales compares a company's enterprise value to its total revenue. It shows how much the market values each rupee of sales, considering debt and cash positions. Lower values may indicate better value.

EV/Sales = Enterprise Value / Total Revenue
Example: If a company has an EV of Rs. 120 billion and annual revenue of Rs. 40 billion, the EV/Sales ratio is 120 / 40 = 3.0x.

Definition: EV/EBITDA compares enterprise value to earnings before interest, taxes, depreciation, and amortization. It is one of the most widely used valuation multiples, especially for comparing companies across different capital structures.

EV/EBITDA = Enterprise Value / EBITDA
Example: If a company has an EV of Rs. 150 billion and EBITDA of Rs. 15 billion, the EV/EBITDA is 150 / 15 = 10x.

Definition: EV/EBIT compares enterprise value to operating earnings (EBIT). Unlike EV/EBITDA, it accounts for depreciation and amortization, making it more conservative and useful for capital-intensive industries.

EV/EBIT = Enterprise Value / EBIT
Example: If a company has an EV of Rs. 200 billion and EBIT of Rs. 16 billion, the EV/EBIT is 200 / 16 = 12.5x.

Definition: EV/FCF compares enterprise value to free cash flow. Since free cash flow represents the actual cash available to all capital providers, this ratio is a strong indicator of whether a company is generating enough cash relative to its total value.

EV/FCF = Enterprise Value / Free Cash Flow
Example: If a company has an EV of Rs. 100 billion and free cash flow of Rs. 8 billion, the EV/FCF is 100 / 8 = 12.5x.
Leverage & Liquidity

Definition: The Debt-to-Equity ratio measures how much debt a company uses compared to its shareholders' equity. A higher ratio indicates more leverage, which increases both risk and potential return.

D/E = Total Debt / Shareholders' Equity
Example: A company with Rs. 60 billion in debt and Rs. 40 billion in equity has a D/E ratio of 60 / 40 = 1.5. This means it uses Rs. 1.50 of debt for every Rs. 1 of equity.

Definition: This ratio measures how many years it would take a company to pay off its debt using EBITDA. A lower ratio means the company can service its debt more easily.

Debt/EBITDA = Total Debt / EBITDA
Example: A company with Rs. 30 billion in debt and EBITDA of Rs. 10 billion has a Debt/EBITDA of 30 / 10 = 3.0x, meaning it would take 3 years of EBITDA to repay its debt.

Definition: The Debt-to-Free-Cash-Flow ratio shows how many years of free cash flow would be needed to pay off all debt. It is a stricter measure than Debt/EBITDA because FCF accounts for capital expenditures.

Debt/FCF = Total Debt / Free Cash Flow
Example: A company with Rs. 50 billion in debt and Rs. 5 billion in free cash flow has a Debt/FCF of 50 / 5 = 10x.

Definition: Asset Turnover measures how efficiently a company uses its total assets to generate revenue. A higher ratio indicates better efficiency in using assets to produce sales.

Asset Turnover = Total Revenue / Average Total Assets
Example: A company with Rs. 80 billion in revenue and Rs. 100 billion in average total assets has an asset turnover of 80 / 100 = 0.8.

Definition: Inventory Turnover shows how many times a company sells and replaces its inventory in a period. A higher ratio indicates efficient inventory management and strong demand.

Inventory Turnover = Cost of Goods Sold / Average Inventory
Example: If COGS is Rs. 40 billion and average inventory is Rs. 8 billion, inventory turnover is 40 / 8 = 5x, meaning inventory is sold and restocked 5 times per year.

Definition: The Quick Ratio measures a company's ability to meet short-term obligations using its most liquid assets (excluding inventory). A ratio above 1 means the company can cover its current liabilities without selling inventory.

Quick Ratio = (Current Assets − Inventory) / Current Liabilities
Example: If current assets are Rs. 25 billion, inventory is Rs. 5 billion, and current liabilities are Rs. 15 billion, the quick ratio is (25 - 5) / 15 = 1.33.

Definition: The Current Ratio measures a company's ability to pay short-term obligations with its current assets. A ratio above 1 indicates the company has more current assets than current liabilities.

Current Ratio = Current Assets / Current Liabilities
Example: If current assets are Rs. 30 billion and current liabilities are Rs. 15 billion, the current ratio is 30 / 15 = 2.0, indicating strong short-term financial health.
Returns

Definition: ROE measures how effectively a company uses shareholders' equity to generate profit. A higher ROE indicates better profitability relative to the equity invested by shareholders.

ROE = Net Income / Shareholders' Equity × 100
Example: A company with net income of Rs. 10 billion and shareholders' equity of Rs. 50 billion has an ROE of (10 / 50) × 100 = 20%.

Definition: ROA shows how efficiently a company uses its assets to generate profit. Unlike ROE, it is not influenced by the company's debt level, making it useful for comparing companies with different capital structures.

ROA = Net Income / Total Assets × 100
Example: A company with net income of Rs. 8 billion and total assets of Rs. 100 billion has an ROA of (8 / 100) × 100 = 8%.

Definition: ROIC measures how well a company generates returns on all the capital invested in its business, including both debt and equity. It is a key metric for assessing management's ability to allocate capital effectively.

ROIC = NOPAT / Invested Capital × 100
Example: If NOPAT (Net Operating Profit After Tax) is Rs. 12 billion and invested capital (equity + debt - cash) is Rs. 80 billion, ROIC is (12 / 80) × 100 = 15%.

Definition: ROCE evaluates how efficiently a company uses its capital (both equity and debt) to generate operating profits. It is especially useful for comparing companies in capital-intensive industries.

ROCE = EBIT / Capital Employed × 100
Example: If EBIT is Rs. 18 billion and capital employed (total assets - current liabilities) is Rs. 120 billion, ROCE is (18 / 120) × 100 = 15%.
Yield & Shareholder

Definition: Earnings Yield is the inverse of the P/E ratio. It shows how much a company earns relative to its share price, expressed as a percentage. It is useful for comparing stocks to bond yields.

Earnings Yield = EPS / Share Price × 100
Example: If EPS is Rs. 10 and the share price is Rs. 100, the earnings yield is (10 / 100) × 100 = 10%.

Definition: FCF Yield measures the free cash flow generated per share relative to the share price. A higher yield suggests the company is generating strong cash flows relative to its market value.

FCF Yield = Free Cash Flow Per Share / Share Price × 100
Example: If FCF per share is Rs. 8 and the share price is Rs. 100, the FCF yield is (8 / 100) × 100 = 8%.

Definition: Dividend Yield shows how much a company pays out in dividends each year relative to its stock price. Income-focused investors often look for stocks with a high and sustainable dividend yield.

Dividend Yield = Annual Dividends Per Share / Share Price × 100
Example: If a company pays Rs. 5 in annual dividends per share and the stock trades at Rs. 100, the dividend yield is (5 / 100) × 100 = 5%.

Definition: The Payout Ratio indicates the proportion of earnings paid out as dividends. A low payout ratio suggests the company retains more earnings for growth, while a high ratio indicates it distributes most profits to shareholders.

Payout Ratio = Dividends Per Share / EPS × 100
Example: If a company pays Rs. 4 in dividends per share and EPS is Rs. 10, the payout ratio is (4 / 10) × 100 = 40%, meaning 40% of profits are returned to shareholders.

Definition: Buyback Yield measures the percentage of a company's market cap returned to shareholders through share repurchases. A positive buyback yield means shares are being retired (value-accretive), while a negative value indicates dilution through new share issuance.

Buyback Yield = (Shares Repurchased × Avg Price) / Market Cap × 100
Example: If a company with a market cap of Rs. 100 billion buys back Rs. 3 billion worth of shares, the buyback yield is (3 / 100) × 100 = 3%. If it issues new shares worth Rs. 2 billion, dilution is -2%.

Definition: TSR captures the total return to a shareholder, including both capital gains (stock price appreciation) and dividends received. It is the most comprehensive measure of what an investor actually earned.

TSR = ((Ending Price − Beginning Price) + Dividends) / Beginning Price × 100
Example: If you bought a stock at Rs. 80, it rose to Rs. 100, and you received Rs. 4 in dividends, TSR is ((100 - 80) + 4) / 80 × 100 = 30%.
Margins

Definition: Gross Margin shows the percentage of revenue retained after deducting the direct cost of goods sold (COGS). It indicates how efficiently a company produces its goods or delivers its services.

Gross Margin = (Revenue − COGS) / Revenue × 100
Example: A company with Rs. 100 billion in revenue and Rs. 60 billion in COGS has a gross margin of (100 - 60) / 100 × 100 = 40%.

Definition: Operating Margin measures the percentage of revenue remaining after all operating expenses (COGS + SG&A + depreciation). It shows how well management controls costs in day-to-day operations.

Operating Margin = Operating Income (EBIT) / Revenue × 100
Example: A company with Rs. 100 billion in revenue and Rs. 20 billion in operating income has an operating margin of (20 / 100) × 100 = 20%.

Definition: Net Profit Margin is the percentage of revenue that ends up as net income after all expenses, taxes, and interest are deducted. It is the ultimate bottom-line profitability measure.

Net Margin = Net Income / Revenue × 100
Example: A company with Rs. 100 billion in revenue and Rs. 12 billion in net income has a profit margin of (12 / 100) × 100 = 12%.

Definition: FCF Margin measures the percentage of revenue converted into free cash flow. It reflects the company's ability to generate real cash from its operations after maintaining or expanding its asset base.

FCF Margin = Free Cash Flow / Revenue × 100
Example: A company with Rs. 100 billion in revenue and Rs. 15 billion in free cash flow has an FCF margin of (15 / 100) × 100 = 15%.

Definition: EBITDA Margin shows the percentage of revenue remaining as EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). It strips out the effects of financing, accounting, and tax decisions, giving a clean view of operational profitability.

EBITDA Margin = EBITDA / Revenue × 100
Example: A company with Rs. 100 billion in revenue and Rs. 25 billion in EBITDA has an EBITDA margin of (25 / 100) × 100 = 25%.
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