# Ratios Calculation Methodology

Explanation of how ratios are calculated for both smallcase and comparable index

## 1. PE Ratio

For each stock in the smallcase / comparable index, calculate the weighted Earnings Per Share (EPS). The weighted earnings per share is derived using the formula [Number of shares of the stock * (Stock Price/ PE Ratio of the stock)]. Total EPS is calculated as the summation of the weighted EPS for all the stocks in the smallcase / comparable index. The smallcase / comparable index PE Ratio is calculated by dividing the index value of smallcase / comparable index by the total EPS.

- Weighted EPS = # of shares * [Price of the stock / PE Ratio]
- Total EPS = sum (weighted EPS) for all the stocks
- PE ratio = Index Value/Total EPS

## 2. PB Ratio

For each stock in the smallcase / comparable index, calculate the weighted Book Value Per Share (BPS). The weighted book value per share is derived using the formula [Number of shares of the stock * (Stock Price/ PB Ratio)]. Total BPS is calculated as the summation of the weighted BPS for all the stocks in the smallcase / comparable index. The smallcase / comparable index PB Ratio is calculated by dividing the index value of smallcase / comparable index by the total BPS.

- Weighted BPS = # of shares * [Price of the stock / PB Ratio]
- Total BPS = sum (weighted BPS) for all the stocks
- PB ratio = Index Value/Total BPS

## 3. Sharpe Ratio

Calculate the rolling annual return of the smallcase / index, this is represented by A. Subsequently calculate the annualised volatility of the smallcase / index, represented by B. Sharpe ratio on any given day is then calculated as A / [B ^ {A / abs(A)}]. The final sharpe ratio is calculated as the average of all daily sharpe points of a smallcase / index.

The annual return of the smallcase / index = (Index value after 1 year from inception) / (Index value at inception) - 1 This value of annual return is calculated daily, on a rolling basis for all smallcases / index and is represented as A. Calculate the annualised volatility of the index as = standard deviation of daily returns (250 points) * sqrt(250), this number is represented as B.

- Sharpe Ratio point on a given day then becomes = A / [B^{A / abs(A)}]
- Sharpe Ratio of the smallcase / index = average(all daily sharpe points of smallcase index)
- *Note - Sharpe ratio for smallcase/index with history of less than

## 4. Dividend Yield

For each stock in the smallcase / comparable index, calculate the weighted Dividends Per Share (DPS). The weighted dividends per share is derived using the formula [Number of shares of the stock * (Stock Price * Dividend yield of the stock / 100 )]. Total DPS is calculated as the summation of the weighted DPS for all the stocks in the smallcase / comparable index. The smallcase / comparable index Dividend Yield is calculated by dividing the Total DPS by index value of smallcase / comparable index.

- Weighted DPS = # of shares * [Price of the stock * (Div Yield / 100)]
- Total DPS = sum (weighted DPS) for all the stocks
- Div Yield % = Total DPS / Index Value * 100