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Company Financials – Explained in Simple Words with Formulas

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An educational financial banner showing simplified company financial concepts like revenue, net income, equity, and EPS with related icons and formulas.

📊 Company Financials – Explained in Simple Words with Formulas

These terms help you understand whether a company is strong, profitable, and worth investing in. Here are the top terms beginners should know:

1. Market Cap (Market Capitalization)

It shows how big a company is.

Formula: Market Cap = Share Price × Total Number of Shares

Example: ₹200 × 1 crore = ₹200 crore

2. P/E Ratio (Price to Earnings Ratio)

It tells how much investors are paying for ₹1 profit.

Formula: P/E = Share Price ÷ EPS

Example: ₹100 ÷ ₹10 = 10

3. EPS (Earnings Per Share)

How much profit is earned per share.

Formula: EPS = Net Profit ÷ Total Shares

Example: ₹10 crore ÷ 1 crore shares = ₹10

4. Book Value

Value of each share if company is liquidated.

Formula: (Assets – Liabilities) ÷ Total Shares

Example: ₹100 crore – ₹40 crore ÷ 1 crore = ₹60

5. ROE (Return on Equity)

How well the company uses shareholders' money.

Formula: (Net Profit ÷ Shareholder’s Equity) × 100

Example: ₹5 crore ÷ ₹25 crore = 20%

6. Debt-to-Equity Ratio

How much debt vs own capital.

Formula: Total Debt ÷ Shareholder’s Equity

Example: ₹30 crore ÷ ₹60 crore = 0.5

7. Dividend

Profit shared with shareholders.

Example: ₹5 per share

8. Dividend Yield

Return from dividend as % of share price.

Formula: (Dividend ÷ Share Price) × 100

Example: ₹5 ÷ ₹100 = 5%

9. Bonus Share

Free shares given to existing shareholders.

Example: 1:2 means 1 free share for every 2 owned.

10. Rights Issue

Discounted shares offered to existing investors.

Example: Buy at ₹80 when market price is ₹100.

📚 Join my Telegram channel for educational stock market insights and research:
👉 https://t.me/Investtrade_by_Ankit

⚠️ This is for learning purposes only. Please do your own research before making any investment decisions.

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