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Ratio

Columbia Electronic Encyclopedia - Cite This Source

ratio. The ratio of two quantities expressed in terms of the same unit is the fraction that has the first quantity as numerator and the second as denominator. For example, if in a group of 100 people 5 die, the ratio of deaths to the total number in the group is 5/100=1/20=.05. Ratios are indicated also by writing the two values with a colon between them, e.g., the ratio of 4 to 8 can be expressed by 4:8 as well as by 4/8.

The Columbia Electronic Encyclopedia Copyright © 2004, Columbia University Press.
Licensed from Columbia University Press

Waist-to-Hip Ratio

Nutrition and Well-Being A to Z - Cite This Source

Waist-to-hip ratio is defined as the measurement of waist circumference divided by hip circumference (for example, a waist measurement of 33 and a hip measurement of 44 give a ratio of .75). It is used as a risk-factor assessment tool for heart disease, hypertension, and type-2 diabetes. Excess body fat is considered a risk factor for the degenerative diseases, particularly abdominal fat, and the waist-to-hip ratio is used to determine the risk. A waist circumference of more than 40 inches in men and more than 35 inches in women, or a waist-to-hip ratio of more than 1.0 for men and more than 0.8 for women, indicate an increased risk for the above diseases.

Simin B. Vaghefi

Nutrition and Well-Being A to Z
Copyright © 1999 by The Gale Group.
Published by The Gale Group. All rights reserved, including the right of reproduction in whole or in part in any form.

Price/Earnings (P/E) Ratio

Encyclopedia of Small Business - Cite This Source

The price/earnings ratio (P/E ratio) provides a comparison of the current market price of a share of stock and that stock's earnings per share, or EPS (which is figured by dividing a company's net income by its number of shares of common stock outstanding). For example, if a company's stock sold for $30 per share and it posted earnings per share of $1.50, that company would have a P/E ratio of 15. A company's P/E ratio typically rises as a result of increases in its stock price, an indicator of the stock's popularity.

"The price-earnings ratio is part of the everyday vocabulary of investors in the stock market," noted Richard Brealey and Stewart Myers in Principles of Corporate Finance, because a company's P/E ratio is often viewed as an indicator of future stock performance. "The high P/E shows that investors think that the firm has good growth opportunities, that its earnings are relatively safe and deserve a low capitalization rate, or both." John B. Thomas observed in the Indianapolis Business Journal, however, that "while accepting that a high P/E ratio is usually a sign of high expectations, analysts and brokers nonetheless are quick to caution that the ratios are only part of the puzzle." A company may post an artificially high P/E ratio as a result of factors that can either boost stock prices or diminish earnings per share. Restructuring charges, merger and acquisition rumors (whether true or false), and high dividend yields all have the capacity to push a company's P/E ratio upward. In other instances, legitimately high P/E ratios can be adversely impacted down the road by such factors as market conditions, technology, and increased competition from new rivals (who may, in fact, be drawn to the industry by the company's previously posted P/E ratios).

Conversely, while a low P/E ratio is often a good indication that a company is struggling, appearances can again be deceiving. In addition, different industry sectors often have diverse P/E ratio averages. A company may have a fairly low P/E ratio when compared with all other corporations; when compared with the other companies within its industry, however, it may be a leader. Finally, a company that posts a loss has no earnings to compare with its stock price. As a result, no P/E ratio can be determined for the company. Still, these companies may remain viable choices for investment if an investor decides that the company under examination is headed toward future profitability. Since so many factors can influence a company's P/E ratio, industry analysts caution against relying on it too heavily in making investment decisions.

EARNINGS PER SHARE (EPS)

Earnings per share is one of the two factors that determine a company's P/E ratio; the other is the price of the company's stock. EPS is derived by dividing a corporation's net income by the number of shares of common stock that are outstanding. A company with 30,000 outstanding shares of common stock and a net income of $270,000 would thus have an earnings per share of $9.

An essential part of determining the P/E ratio, earnings per share has also come to be regarded as an important piece of information for the investment community in and of itself. "A primary concern of investors is how profitable a company is relative to their investment in the company," wrote Jay M. Smith, Jr., and K. Fred Skousen in Intermediate Accounting. "The investor is concerned with how net income relates to shares held and to the market price of the stock…. Only by converting the total amounts to per share data can a meaningful evaluation be made," because EPS figures can illustrate the degree to which a company's net income is keeping pace with its capital structure. In recognition of the importance of this information, corporations are required to report EPS amounts on their income statement (privately owned companies are under no such obligation).

Ratio

Wikipedia, the free encyclopedia - Cite This Source

A ratio is a quantity that denotes the proportional amount or magnitude of one quantity relative to another.

Ratios are unitless when they relate quantities of the same dimension. When the two quantities being compared are of different types, the units are the first quantity "per" unit of the second — for example, a speed or velocity can be expressed in "miles per hour". If the second unit is a measure of time, we call this type of ratio a rate.

Fractions and percentages are both specific applications of ratios. Fractions relate the part (the numerator) to the whole (the denominator) while percentages indicate parts per 100.

A ratio is written as two whole numbers (the terms) separated by a colon (:) which is read as the word "to". For example, a ratio of 2:3 ("two to three") means that the whole is made up of 2 parts of one thing and 3 parts of another — thus, the whole contains five parts in all. To be specific, if a basket contains 2 apples and 3 oranges, then the ratio of apples to oranges is 2:3. If another 2 apples and 3 oranges are added to the basket, then it will contain 4 apples and 6 oranges, resulting in a ratio of 4:6, which is equivalent to a ratio of 2:3 (thus ratios reduce like regular fractions). In this case, 2/5 or 40% of the fruit are apples and 3/5 or 60% are oranges in the basket.

Note that in the previous example the proportion of apples in the basket is 2/5 ("two of five" fruits, "two out of five" fruits, "two fifths" of the fruits, or 40% of the fruits). Thus a proportion compares part to whole instead of part to part.

Ratios can be converted from centimeters to meters by simply adding two zeros to the number representing the ratio. For example; 1:10 means that 1 centimeter represents 10 centimeters in real life, but to convert that to 10 meters, add to zeros on to the ratio, therefore giving you a ratio of 1:1000. This means that one centimeter represents 1000 centimeters in real life, or 10 meters. This works for converting meters to kilometers too. Conversions in ratio representation is useful for simplifying map scales to easier to read terms. (Article by jcebrammall)

Throughout the physical sciences, ratios of physical quantities are treated as real numbers. For example, the ratio of $2 pi$ metres to 1 metre (say, the ratio of the circumference of a certain circle to its radius) is the real number $2 pi$ . That is, $2 pi$ m/1m = $2 pi$ . Accordingly, the classical definition of measurement is the estimation of a ratio between a quantity and a unit of the same kind of quantity. (See also the article on commensurability in mathematics.)

In algebra, two quantities having a constant ratio are in a special kind of linear relationship called proportionality.

More examples

The ratio of heights of the Eiffel Tower (300 m) and the Great Pyramid of Giza (139 m) is 300:139, so one structure is more than twice the height of the other (more precisely, 2.16 times).
The ratio of the mass of Jupiter to the mass of the Earth is approximately 318:1, meaning that Jupiter's mass is 318 times that of the earth.
If two axles are connected by gear wheels, the number of times one axle turns for each turn of the other is known as the gear ratio, one familiar example of which is the number of turns of the pedals of a bicycle compared with number of turns of the rear wheel.
The ratio of hydrogen atoms to oxygen in water (H₂O) is 2:1, which means for every one oxygen atom, there would be two hydrogen atoms as well.
In statistics, the ratio of the probability of something happening to the probability of it not happening is called the odds of the event happening.
In music, the interval of a perfect fifth is formed by two pitches, or frequencies, at a ratio of 3:2, with the higher note being 1.5 times the frequency of the lower.