# Ratios for Investment Analysis
Three key ratios used by investors to evaluate investment opportunities:
## 1. Earnings Per Share (EPS)
EPS = Net Profit available to Equity Shareholders / Number of Equity Shares Outstanding
- Measures the profit attributable to each equity share.
- A key driver of MPS and dividend capacity.
## 2. Dividend Yield Ratio
Dividend Yield = [Equity Dividend per Share (DPS) / Market Price per Share (MPS)] * 100
- Indicates the cash return an investor earns on the current market price.
- Useful for income-oriented investors comparing across stocks/instruments.
## 3. Return on Capital Employed (ROCE)
ROCE = [Earnings Before Interest and Tax (EBIT) / Capital Employed] * 100
- Measures the overall efficiency of capital deployed (debt + equity).
- Can be computed pre-tax or post-tax depending on the analysis.
## Why These Three?
They collectively address the three concerns of an investor:
- EPS — How much profit is mine per share?
- Dividend Yield — What cash return do I get on today's price?
- ROCE — How efficiently is my capital being used by the firm?