Simple English definitions for legal terms
Read a random definition: Investor Protection Guide: Investment Newsletters
The earnings-price ratio is a way to measure how much profit a company is making compared to its stock price. It is calculated by dividing a company's earnings per share by its stock price. The higher the ratio, the better the investment yield. It is also called the earnings yield.
The earnings-price ratio is a financial term that shows the earnings per share of a security divided by its market price. In simpler terms, it is the profit a company makes for every dollar invested in it. The higher the ratio, the better the investment yield.
Let's say a company has earnings per share of $5 and its stock is trading at $50 per share. The earnings-price ratio would be 0.1 or 10%. This means that for every dollar invested in the company, the investor would earn 10 cents in profit.
Another example would be a bond with a par value of $1000 and a coupon rate of 5%. The coupon yield would be $50 per year ($1000 x 0.05).
These examples illustrate how the different types of yield are calculated and how they can be used to evaluate the profitability of an investment.