PRICE EARNINGS RATIO The most important ratio that investors should look at is Price Earnings (P/E) Ratio. In layman’s terms this is share price divided by profit per share. The P/E Ratio of a Company should be compared against other companies in sector and against market as a whole. I also believe a good test is to compare P/E Ratio of a company with other similar companies quoted on other international stock exchanges.

The P/E Ratio to be used in investment decisions should be prospective P/E Ratio and not historical P/E Ratio. Unfortunately in most of financial press P/E Ratio stated is historic one that may not reflect future prospects of a business. Hence investors should look at P/E Ratio based on current and future earnings and not previous year’s figure.

An illustration of how an investor could properly carry out this exercise is as follows: A food retailer has a Prospective P/E Ratio of 10 times. It is currently expanding into all towns in Cyprus by opening new supermarkets. Its main competitor in Cyprus is estimated to have a Prospective P/E Ratio of 15 times. When one compares rating to other international quoted businesses in same sector one has found that these businesses command a P/E Rating of 20 times. This information would appear to indicate that investor should seriously consider an investment in this company since there is a case to suggest it is under valued.

NET ASSET VALUE (NAV): A useful ratio for evaluation of investment companies is net asset value per share. In Cyprus most companies disclose their NAV on a two weekly basis whereas some companies go as for as to disclose figure on a weekly basis.

Car insurance is one of those very boring expensive products that you loathe having to pay for but have no choice if you want to drive a car on Britain’s roads. Why therefore would supermarkets want to be associated with such a seemingly expensive pain in pocket? Well it seems that public think it’s a great idea and are buying it from these stores in their thousands with belief that it must cheap if supermarkets are selling it. The strange thing is that companies behind these deals, who are actually underwriting risk, are same companies who have been selling you car insurance for years.

Tesco for example seem to be incredibly successful in selling motor insurance to their customers with statements proclaiming that you could save up to £150 compared to some leading insurers. Tesco of course is not an insurer. If you look closely at bottom of Tesco car insurance webpage, you will notice it says that policy is provided and underwritten by a company called UK Insurance Limited. Who on earth is this company you may ask. UK Insurance Limited is part of Royal Bank of Scotland who also own Direct Line along with Churchill and Privilege.