Reading a business, not a ticker
Fundamental analysis is the study of a business — its statements, ratios and competitive position — to understand its quality and roughly what it may be worth. The share price is just the market's changing opinion of that business.
Every listed company publishes three financial statements. Read together, they tell you whether a business earns real money, how it is funded, and whether profit is turning into cash.
The three statements
- Balance sheet — a snapshot of what the company owns (assets), owes (liabilities) and the owners' stake (equity). The identity is Assets = Liabilities + Equity.
- Income statement (P&L) — revenue minus expenses over a period, ending in net profit, and showing how margins evolve.
- Cash flow statement — the actual cash moving through operating, investing and financing activities. Cash is harder to massage than accounting profit.
Profitability ratios — try them live
Ratios compress the statements into comparable numbers. Expand a calculator below and change the inputs — it recomputes instantly. Every output is arithmetic on your numbers, not a view on any stock.
How much profit the business earns per rupee of owners' capital.
Formula: ROE = Net profit ÷ Shareholder equity
Where the return comes from: margin, efficiency and leverage.
Formula: ROE = Net margin × Asset turnover × Leverage
Returns on all capital (debt + equity) — good for capital-heavy firms.
Formula: ROCE = EBIT ÷ Capital employed
Core profitability before financing and tax — a gauge of pricing power.
Formula: Operating margin = Operating profit ÷ Revenue
Valuation ratios — try them live
Valuation ratios put price in context. On their own they mean little — they are only useful versus peers and the company's own history.
Rupees paid per rupee of annual earnings.
Formula: P/E = Price ÷ Earnings per share
Common for banks and asset-heavy businesses.
Formula: P/B = Price ÷ Book value per share
Puts a high P/E in the context of growth.
Formula: PEG = P/E ÷ EPS growth rate
A simple Gordon-growth model to feel how sensitive value is to assumptions.
Formula: Value = FCF × (1+g) ÷ (r − g)
Balance-sheet health & quality
Before valuation, check that the business is sound. Leverage and liquidity ratios describe how safely it is financed.
Leverage and solvency gauge.
Formula: D/E = Total debt ÷ Equity
Short-term liquidity check.
Formula: Current ratio = Current assets ÷ Current liabilities
How comfortably profit covers interest.
Formula: Interest coverage = EBIT ÷ Interest
Key terms
EPS
Earnings per share — net profit divided by the number of shares.
Free cash flow
Operating cash flow minus the capital spending needed to keep the business running.
Corporate governance
Board independence, promoter pledging, related-party dealings and audit quality — the guardrails on how a company is run.
Relative valuation
Valuing a company by comparing its multiples (P/E, EV/EBITDA) with similar companies rather than modelling its cash flows.
Test yourself
1. Which statement shows actual cash moving through the business?
The cash flow statement tracks operating, investing and financing cash — harder to massage than profit.
2. A P/E ratio is only meaningful when…
P/E is a relative gauge — context of peers and history is essential.
3. ROE rising purely because of more debt is…
DuPont splits ROE into margin, turnover and leverage, revealing debt-driven ROE.
FAQs
No. Each calculator computes a ratio purely from the numbers you type in. It is a generic teaching tool — not a valuation, opinion, target price or recommendation for any security. PCJ does not provide research or advisory services.
There isn't one. Profitability (ROE, ROCE, margins), leverage (debt/equity, interest coverage), liquidity (current ratio) and valuation (P/E, P/B, PEG) each answer a different question — you read them together, alongside the business's qualitative story.
No. A low P/E can reflect genuine value or a business the market expects to shrink. Ratios describe; they do not decide. Always read them with the company's growth, debt and governance.
In the company's audited annual report and quarterly results, and in exchange filings on NSE and BSE. Learning to read those primary documents is the real skill — the ratios are just summaries of them.
Educational content for general awareness only — not investment, trading or tax advice, and not a recommendation to buy or sell any security. PCJ Holdings does not provide research or advisory services. Examples and calculator outputs are hypothetical and illustrative. Investments in securities markets are subject to market risks; read all related documents carefully. Figures are indicative for FY 2025-26 and may change.