Question

Which category of ratios are the most popular for investors? Liquidity ratios, financial leverage ratios, asset management ratios, profitability measures or market value ratios? Explain why?

Answer 1

Market value ratios are always most important for the investors because market value ratios will be providing them with an estimation of valuation of the company in regards to its peers and market value will be providing them with the flexibility of relative valuation approach also.

Price to earning ratio which is the most important market value metric which is used by investors for investment into the company by comparing the relationship of earning in respect to the current market price and assignment of a price multiple and that price multiple would be compared with respect to various Other companies in the same industry so it will be providing them with the idea of valuation and over evaluation and excess evaluation of the company as well, so Investors are most importantly focusing upon market value ratios, because market value ratio will be providing them the valuation of the company in respect to the estimation of the market participants and since investors are often investing into the stock exchanges they will be looking for lower prices to buy and higher prices to sell, so they will always look for gain on their investment and hence they will always look for investment through the market value analysis.

Hence,MARKET VALUE will be most important and popular ratio for investors.