Complete this interactive activity to understand how to use ratio to solve problems. Then test your knowledge. There are 6 cupcakes in a batch - 4 chocolate cupcakes and 2 strawberry cupcakes.

For example, if a company's stock trades at $75 and its EPS is $3, investors are paying $25 for every $1 of earnings, resulting in the following: P/E Ratio: 25 = $75 ÷ $3. Investors use two ...

while a falling ratio may indicate short covering or renewed investor confidence. Traders use this metric alongside other indicators to assess potential price movements and market sentiment shifts.

High short ratio indicates more investors betting against a stock, low ratio shows optimism. Short ratio aids in identifying potential short squeezes and risk levels in stock investment.

While using total debt in the numerator of the debt-to-equity ratio is common, a more revealing method would use net debt, or total debt minus cash and cash equivalents the company holds.