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Popular stock market terms explained (part 3)

This is the third in our series of posts covering terms used in the UK stockmarket and the financial services sector.

Price earnings ratio

This is one of the more simple valuation measurements used in the market and reflects how much investors are willing to pay for each pound of profit a company delivers. For example if a company was made a profit of £10 million and was valued at £100 million by the stock market, this would indicate that investors were willing to pay ten times the earnings of the company to obtain a stake.

Dividend yield

This has a direct relationship with the dividend a company pays for example, if a company paid a dividend of 10p per share and the share price was 100p, then the yield would be (10/100)*100 = 10%. It is probably easier to compare this to the rate of interest you receive on money held in your bank.


An IFA is an independent financial adviser who is able to offer advice due to the fact they hold a professional qualification from a professional UK body allowing them to give advice. Instances of advice from unqualified or unregulated individuals or companies are dealt with by the FSA.

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