👉 Investing math involves understanding key ratios and metrics that help investors evaluate opportunities and make informed decisions. The Price-to-Earnings (P/E) ratio, for instance, compares a stock's current price to its earnings per share, indicating how much investors are willing to pay for each dollar of earnings. The Price-to-Book (P/B) ratio assesses a company's market value relative to its book value per share, revealing whether the stock is overvalued or undervalued. The Dividend Yield shows the annual dividend payment relative to the stock price, helping investors gauge income potential. Additionally, metrics like the Price-to-Sales (P/S) ratio and Earnings Growth Rate provide insights into revenue performance and future profitability. Understanding these ratios, along with others like the Sharpe Ratio for risk-adjusted returns and the Internal Rate of Return (IRR) for project evaluation, equips investors to assess risk, return, and value, ultimately guiding their investment choices.
