Investing Basics: Key Metrics

These flashcards cover definitions and formulas for stock price, market capitalization, and the P/E ratio—essential metrics for evaluating a company before investing.

What are the three primary factors to evaluate when investing in a company?

Stock price, market capitalization, and price-to-earnings (P/E) ratio.

How is a company’s market capitalization calculated?

By multiplying the share price by the total number of shares outstanding.

What is the formula for the price-to-earnings (P/E) ratio?

Share price divided by annual earnings per share.

Which metric represents the total market value of all a company’s outstanding shares?

Market capitalization.

What does a company’s stock price indicate?

The current market price at which a single share of the company trades.