# ratio

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## Ratio

The division of one piece of financial information by another. Financial ratios are very common in fundamental analysis, which investigates the financial health of companies. An example of a financial ratio is the price-earnings ratio, which divides a publicly-traded company's share price by its earnings per share. This and other ratios help analysts determine whether a company's share price properly reflects its performance.

## ratio

The relation between two quantities when compared mathematically with one another. For example, the most frequently used ratio among investors is the price-earnings ratio. Financial analysts, investors, and managers use ratios to evaluate many factors such as the attractiveness of a stock or the operating efficiency of a company. Also called

*financial ratio*. See also activity ratio, debt management ratio, liquidity ratio, profitability ratio.Want to thank TFD for its existence? Tell a friend about us, add a link to this page, or visit the webmaster's page for free fun content.

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