P.E Ratio = Price to Earnings
Example:
Business A:
Sale price: $150,000
Annual Revenue: $50,000
P.E ratio = 3
Limited growth opportunities, company can't increase profits without substantially expanding in ways that increase it's value.
Business B:
Sale Price: $150,000
Annual Revenue: $10,000
P.E Ratio = 15
Much better room to increase revenue to increase profits.
http://www.investopedia.com/university/peratio/#axzz1dhAUlkAE
- Divide the price of a business by annual revenue. The number you get is a percentage.
Example:
Business A:
Sale price: $150,000
Annual Revenue: $50,000
P.E ratio = 3
Limited growth opportunities, company can't increase profits without substantially expanding in ways that increase it's value.
Business B:
Sale Price: $150,000
Annual Revenue: $10,000
P.E Ratio = 15
Much better room to increase revenue to increase profits.
http://www.investopedia.com/university/peratio/#axzz1dhAUlkAE
No comments:
Post a Comment