It is useful when you compare companies of different

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Unformatted text preview: d non-operations. It is useful when you compare companies of different sizes. Why? Other relevant ratios (2) ● For profitability: ROE = Net income available to commons/ Equity There are two types of stocks: (a) common (b) preferred -> stock with dividend priority over common stock, normally with a fixed dividend rate, sometimes without voting rights. Other relevant ratios (3) ● For profitability: ROE = Net income available to commons / Equity ROE = [Net Income - Preferred Dividends] / Equity Cash flows ● Notice that some analysts look at levered free cash flow. Its similar to the standard cash flow, but subtracts amortization and interests. market value ratios Market value ratios ● The most widely used is PE ratio = Price per share / Earning per share ● Some people also call it as PE multiple P/E ● We will see that this ratio is correlated wi...
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