PER shows the number of times the price covers the earnings per share over a twelve month period. Investors commonly use this ratio to measure the attractiveness of particular shares and to compare shares in one company with those in another.

The PER of a stock (also called its "earnings multiple", or simply "multiple" or "PE") is used to measure how cheap or expensive share prices are. It is probably the single most consistent red flag to excessive optimism and over-investment. It also serves, regularly, as a marker of business problems and opportunities. By relating price and earnings per share for a company, one can analyze the market's valuation of a company's shares relative to the wealth the company is actually creating. A P/E ratio is calculated as:

For example, the P/E ratio of company A with a share price of $10 and earnings per share (EPS) of $2 is 5. The higher the P/E ratio, the more the market is willing to pay for each dollar of annual earnings. Companies with high P/E ratios are more likely to be considered "risky" investments than those with low P/E ratios, since a high P/E ratio signifies high expectations. Comparing P/E ratios is most valuable for companies within the same industry. The last year's price/earnings ratio (P/E ratio) would be actual, while current year and forward year price/earnings ratio (P/E ratio) would be estimates, but in each case, the "P" in the equation is the current price. Companies that are not currently profitable (that is, ones which have negative earnings) don't have a P/E ratio at all.

The P/E is sometimes referred to as the "multiple", because it shows how much investors are willing to pay per dollar of earnings. If a company were currently trading at a multiple (P/E) of 20, the interpretation is that an investor is willing to pay $20 for $1 of current earnings.

EPS measures the earnings that are attributed to each equivalent ordinary share over a twelve month period. It is calculated by dividing the company's earnings by the number of shares on issue in accordance with AASB 1027 'Earnings per share'. In a simple sentence, Earnings per share (EPS) are the earnings returned on the initial investment amount.

The EPS formula does not include preferred dividends for categories outside of continuing operations and net income as shown here. This formula also shows the most basic formula for earnings per share.

The EPS formula is shown here for Net Income and Continuing Operations (substitute income from continuing operations for net income).

For example, if a company with half a million shares on issue has earnings of $1 million, the earnings per share is $2.

The annual dividend shown as a percentage of the last sale price for the shares. A simplified rate of return on an investment.

Dividend yield is a way to measure how much cash flow you are getting for each dollar invested in an equity position - in other words, how much "bang for your buck" you are getting from dividends. Investors who require a minimum stream of cash flow from their investment portfolio can secure this cash flow by investing in stocks paying relatively high, stable, dividend yields.

For example, if two companies both pay annual dividends of $1 per share, but ABC company's stock is trading at $20 while XYZ company's stock is trading at $40, then ABC has a dividend yield of 5% while XYZ is only yielding 2.5%. Thus, assuming all other factors are equivalent, an investor looking to supplement his/her income would likely prefer ABC's stock over that of XYZ.

The total number of shares on issue multiplied by their market price. This can be applied to work out the market value of one company or of the value of all companies listed on the exchange.

A common misconception is that the higher the stock price, the larger the company. Stock price, however, may misrepresent a company's actual worth. If we look at two fairly large companies, IBM and Microsoft, we see that at the time of writing their stock prices are $29 and $22.75 respectively. Although IBM's stock price is higher, it has about 1.73 billion shares outstanding, while MSFT has 10.68 billion. As a result of this difference, we can see that MSFT's market cap of $242.97 billion is actually quite larger than IBM's $50.17 billion. If we compared the two companies by solely looking at their stock prices, we would not be comparing their true values, which are affected by the amount of their outstanding shares

For example, if XYZ was trading at $20 per share and had 1 million shares outstanding, then the market capitalization would be $20 million ($20 x 1 million shares). It's that simple.

Price-to-book ratio or P/B ratio, is a ratio used to compare a stock's market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter's book value (book value is simply total assets minus intangible assets and liabilities). It is also knows as the "price-equity ratio".

A lower P/B ratio could mean that the stock is undervalued. However, it could also mean that something is fundamentally wrong with the company. As with most ratios, be aware this varies a fair amount by industry. This ratio also gives some idea of whether you're paying too much for what would be left if the company went bankrupt immediately.

The current price divided by the last actual sales revenue per share figure. The price-to-sales ratio provides a simple approach: take the company's market capitalization (the number of shares multiplied by the share price) and divide it by the company's total sales over the past 12 months.

The lower the ratio, the more attractive the investment. As easy as it sounds, price-to-sales provides a useful measure for sizing up stocks. But investors need to be mindful of the ratio's potential pitfalls and possible unreliability.

However, sales don't reveal the whole picture, since the company might be unprofitable. Because of the limitations, price to sales ratio are usually used only for unprofitable companies, since such companies don't have a price/earnings ratio (P/E ratio).

A ratio used to determine a stock's value while taking into account earnings growth. It is calculated by dividing the Price per Earnings Ratio (PER) with the Annual Earnings Per Share (EPS) Growth.

In general, the P/E should equal the long-term growth rate in percent. A ratio of one is considered to represent fair value and a ratio greater than one indicates a more "expensive" stock. This ratio is a useful high level check to see whether the P/E is justified. PEG can be a little simplistic in some cases as it does not factor in interest rates or risk factors. Lower interest rates, for example, would justify a higher P/E ratio but would not necessarily change the growth prospects for a company. This could lead to a PEG ratio greater than one but leave the company still reasonably valued.

PEG is a widely used indicator of a stock's potential value. It is favored by many over the price/earnings ratio because it also accounts for growth. Similar to the P/E ratio, a lower PEG means that the stock is more undervalued.

A measure of a company's financial leverage. Debt/equity ratio is equal to long-term debt divided by common shareholders' equity. Typically the data from the prior fiscal year is used in the calculation. Investing in a company with a higher debt/equity ratio may be riskier, especially in times of rising interest rates, due to the additional interest that has to be paid out for the debt.

A high debt/equity ratio generally means a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense.

If a lot of debt is used to finance increased operations (high debt to equity), the company could potentially generate more earnings than it would have without this outside financing. If this were to increase earnings by a greater amount than the debt cost (interest), then the shareholders benefit as more earnings are being spread around to the same amount of shareholders. However, the cost of this debt financing may outweigh the return that the company generates on the debt through investment and business activities and become too much for the company to handle. This might lead to bankruptcy, which would leave shareholders with nothing, so it is a delicate balance. This is what the leverage effect is about and what the debt/equity ratio measures

For example, if a company has long-term debt of $3,000 and shareholder's equity of $12,000, then the debt/equity ratio would be 3000 divided by 12000 = 0.25. It is important to realize that if the ratio is greater than 1, the majority of assets are financed through debt. If it is smaller than 1, assets are primarily financed through equity.

The value at which an asset is carried on a balance sheet. In other words, the cost of an asset minus accumulated depreciation. It can also means the net asset value of a company, calculated by total assets minus intangible assets (patents, goodwill) and liabilities.

Book value is the accounting value of a firm. It has two main uses:

1. It is the total value of the company's assets that shareholders would theoretically receive if a company were liquidated.
2. By being compared to the company's market value, the book value can indicate whether a stock is under- or overpriced.
3. In personal finance, the book value of an investment is the price paid for a security or debt investment. When a stock is sold, the selling price less the book value is the capital gain (or loss) from the investment.

Is set by the exchange where the stock is traded, several days (usually two) before the date of record, so that all trades made on previous dates can be properly settled and the shareholder list on the date of record will accurately reflect the current owners. Purchasers buying before the ex-dividend date will receive the dividend. The stock is said to trade cum dividend on these dates. Purchasers buying on the ex-dividend date or after will not receive the dividend. The stock trades ex-dividend on these dates.

Distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders. The dividend is most often quoted in terms of the dollar amount each share receives (i.e. dividends per share or DPS). It can also be quoted in terms of a percent of the current market price, referred to as dividend yield

High-growth companies rarely offer dividends because all their profits are reinvested to help sustain higher-than-average growth.

A Dividend Reinvestment Plan (a.k.a. "DRIP") is an equity investment option offered directly from the underlying company. The investor typically does not receive quarterly dividends directly as cash. Instead the investor's dividends are directly reinvested in the underlying equity. (It should be noted that the investor still must pay tax annually on his or her dividend income, whether it is received or reinvested.)

This allows the investment return from dividends to be immediately invested for the purpose of price appreciation (and compounding), without incurring brokerage fees or waiting to accumulate enough cash for a full share of stock. Some DRIPs are free of charge for participants, while others do charge fees and/or proportional commissions.

A franking credit is a nominal unit of tax paid by companies paying tax in countries that have a dividend imputation system. Franking credits are passed on to shareholders along with dividends. Shareholders include in their assessable income not the dividends received but the grossed-up amount back-calculated from that dividend and the current tax rate, then have their income tax payable calculated thereupon, then use franking credits to offset tax payable at the rate of a dollar per credit. In Australia and New Zealand the end result is the elimination of double taxation upon company profits.

The full article about the franking credits is available here.

Market depth displays orders that are currently in the market. When two orders match (a buy and sell order at the same price), the orders are filled, and they disappear from the market depth, and become trades history.

The full article about the market depth is available here.

This calculation is designed to assess the probability of a future cut in dividends based on the companys 10-year track record. It is based on two factors: (1) The number of times in the last 10 years (or less, if data is not available), in which the annual dividend has been cut. This percentage is then multiplied by the average percentage size of the cut. The higher the percentage, the more stable the dividend. A dividend stability of 100 percent indicates no dividend cuts have been recorded.