ACCOUNTING TERMS - ACCOUNTING DICTIONARY - ACCOUNTING GLOSSARY
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PREDICTOR RATIOS Definition
PREDICTOR RATIOS: Most ratios are descriptive in nature; that is, they describe the firm as it is now. As you might expect, Predictor Ratios provide suggestions about likely future conditions for the firm. VentureLine provides two industry standard Predictor Ratios:
- Altman Z-Score - a valid predictor or bankruptcy, and,
- Sustainable Growth Rate - shows the degree to which a concern can grow using their retained earnings to fund growth.
Learn new Accounting Terms
LOT COSTING see BATCH COSTING.
PRICE EARNINGS MULTIPLE: The price-earnings ratio (P/E) is simply the price of a companys share of common stock in the public market divided by its earnings per share. Multiply this multiple by the net income and you will have a value for the business. If the business has no income, there is no valuation. If the common stock in not publicly traded, valuation of the stock is purely subjective. This may not be the best method, but can provide a benchmark valuation.