Glossary · 30 terms
Fundamental Analysis
All fundamental analysis terms in the EquitiesIndia.com glossary — plain-English definitions written for Indian retail investors.
Asset Turnover Ratio(Total Asset Turnover)
Asset Turnover Ratio measures how efficiently a company uses its total assets to generate revenue, expressed as revenue divided by average total assets.
Book Value Per Share(BVPS)
Book Value Per Share is the net asset value of a company allocated to each equity share, calculated by dividing total shareholders' equity by the number of outstanding shares.
Cash Conversion Cycle(CCC)
The Cash Conversion Cycle (CCC) measures the number of days a company takes to convert its investments in inventory and other resources into cash flows from sales.
Current Ratio(Working Capital Ratio)
The Current Ratio measures a company's ability to meet its short-term obligations using its short-term assets, calculated by dividing current assets by current liabilities.
Debt-to-Equity Ratio(D/E Ratio)
The Debt-to-Equity Ratio compares a company's total financial debt to its shareholders' equity, measuring the extent to which the business is financed by creditors versus owners.
Diluted EPS(Fully Diluted EPS)
Diluted EPS adjusts the basic earnings per share to account for all potential equity shares that could be created through the conversion of securities such as ESOPs, warrants, and convertible instruments.
Dividend Payout Ratio(Payout Ratio)
The Dividend Payout Ratio is the proportion of a company's net earnings paid out as dividends to shareholders, expressed as a percentage of earnings per share or total net profit.
Dividend Yield(Dividend Yield %)
Dividend Yield is the annual dividend per share expressed as a percentage of the current share price, indicating the income return an investor earns from holding the stock relative to its market value.
Earnings Growth(EPS Growth)
Earnings Growth refers to the rate at which a company's net profit or earnings per share increases over a specified period, and is a central driver of long-term share price appreciation.
EBITDA(Earnings Before Interest Taxes Depreciation and Amortisation)
EBITDA — Earnings Before Interest, Taxes, Depreciation, and Amortisation — is a proxy for a company's core operating cash generation, stripping out the effects of financing decisions and non-cash charges.
EPS(Earnings Per Share)
Earnings Per Share (EPS) is the portion of a company's net profit allocated to each outstanding equity share, and serves as one of the most fundamental indicators of corporate profitability.
EV/EBITDA(Enterprise Value to EBITDA)
EV/EBITDA (Enterprise Value to EBITDA) is a valuation multiple that compares a company's total enterprise value — equity plus net debt — to its EBITDA, offering a capital-structure-neutral view of valuation.
Free Cash Flow(FCF)
Free Cash Flow (FCF) is the cash a company generates from operations after deducting capital expenditure, representing the true cash available for debt repayment, dividends, buybacks, or further investment.
Gross Profit Margin(Gross Margin)
Gross Profit Margin measures gross profit — revenue minus cost of goods sold — as a percentage of revenue, indicating how much is left after covering direct production costs before any operating expense is deducted.
Interest Coverage Ratio(Debt Service Coverage)
The Interest Coverage Ratio measures how many times a company's operating earnings can cover its interest expense, indicating its ability to service debt obligations from its current earnings.
Inventory Turnover(Stock Turnover Ratio)
Inventory Turnover measures how many times a company sells and replaces its inventory within a period, reflecting the efficiency of inventory management and demand strength.
Net Income(Net Profit)
Net Income (or net profit) is a company's total earnings after deducting all expenses — including operating costs, interest, depreciation, taxes, and exceptional items — from total revenue.
Net Profit Margin(Net Margin)
Net Profit Margin expresses net profit (after all expenses, interest, depreciation, and taxes) as a percentage of revenue, indicating how much of each rupee of sales ultimately translates into profit for shareholders.
Operating Cash Flow(OCF)
Operating Cash Flow (OCF) is the net cash generated by a company's core business operations during a period, as reported in the cash flow statement, reflecting the liquidity created before financing and investing activities.
Operating Profit Margin(EBIT Margin)
Operating Profit Margin measures EBIT (or PBIT) as a percentage of revenue, reflecting the core business profitability before the effects of financing costs and taxes.
P/B Ratio(Price-to-Book Ratio)
The Price-to-Book Ratio compares a company's market capitalisation to its net book value, indicating how much premium (or discount) the market places on the company's accounting net worth.
P/E Ratio(Price-to-Earnings Ratio)
The Price-to-Earnings Ratio measures how much investors are willing to pay for every rupee of a company's earnings. It is one of the most widely used valuation metrics in equity research.
PEG Ratio(Price/Earnings to Growth Ratio)
The PEG Ratio (Price/Earnings to Growth) adjusts the P/E ratio by the company's expected earnings growth rate, providing a more nuanced valuation that accounts for future growth potential.
Price-to-Sales Ratio(P/S Ratio)
The Price-to-Sales Ratio (P/S) compares a company's market capitalisation to its annual revenue, offering a valuation benchmark that remains applicable even when earnings are negative.
Quick Ratio(Acid-Test Ratio)
The Quick Ratio (or Acid-Test Ratio) is a stricter liquidity measure than the current ratio, excluding inventory and prepaid expenses from current assets to assess whether a company can meet immediate obligations with its most liquid assets.
Revenue(Turnover)
Revenue (also called turnover or net sales) is the total income generated by a company from its primary business activities before any costs or expenses are deducted.
ROA(Return on Assets)
Return on Assets (ROA) indicates how profitably a company uses its total asset base to generate earnings, expressed as net profit divided by average total assets.
ROCE(Return on Capital Employed)
Return on Capital Employed (ROCE) measures the profitability of a business relative to the total capital it uses — both equity and debt — making it a more comprehensive metric than ROE for capital-intensive industries.
ROE(Return on Equity)
Return on Equity (ROE) measures how efficiently a company generates profit from shareholders' equity, expressed as a percentage. It is a core indicator of management's effectiveness in deploying capital.
Working Capital(Net Working Capital)
Working Capital is the difference between current assets and current liabilities, representing the short-term liquidity available to fund day-to-day business operations.