Befor investing in any BSE or NSE scrip check out some financial ratios that can help you to know whether the company is on the financial footing.
Here are key measures to consider:
* Price to earning ration (P/E): For large cap stocks it should be below 20 for all other stocks (including small, mid cap companies) it should not exceed 40.
* Price to sales ratio (PSR): PSR should be as close to 1 as possible.
* Return on average equity (ROE): ROE at least growing up by 10% annually.
* Earning growth: It should be at least higher than 10% the year before. This rate should be maintained every year.
* Debt to asset raio: It should be at least half of total assets.
