What is the price for sale?

The price ratio (PSR) compares the total value of outstanding shares in the company to total income in the last 12 months. The lower the price for sale, the greater the value in each share share compared to each dollar on sale. PSR is a quick comparison that provides potential investors if the company's shares are excessively or underestimated. The resulting value is called market capitalization. The income used in the calculation is the previous 12 -month income or the previous four quarters, as published by the Company in its financial policy or quarterly report. This time period is also called the end 12 months.

The use of the price ratio for sale can be beneficial in several situations. If the company is new in its sector and has no earnings, but has a sales history, this ratio can provide a value indicator. If the company has lost money in the past year due to cyclic fluctuations in its industry or unusual expenses,It offers PSR views of costs independent.

Sometimes the analyst adjusts the price ratio to the sale to include the company's debt. The number of market capitalization is added to the overall outstanding debt and creates a number known as the value of the company. This increased number causes an increase in the ratio. This modified ratio allows the evaluator to compare two companies where he has one substantial debt and the other does not. A company with high sales performance supported by a high level of debt may or may not be as advantageous as a modest sales company, but a small debt.

For effective use of the price ratio for sale, it is necessary to compare companies in the same sector or understanding. The difference in the typical PSR between two industries may vary significantly. Obviously low ratio for a software company may not be as good as a higher ratio for the manufacturer that is inComparison with competitors of the manufacturer actually lower.

In assessing a potential investment, much more information needs to be considered. The low price ratio may be a good indicator that the company's shares are underestimated, but should be reviewed in conjunction with other financial data. Adopting an investment decision only on the basis of one ratio could completely overlook the other problems that the company concerned.

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