Valuation ratios are used to determine what the company is worth. These ratios can use to understand whether a particular company share price is cheap or expensive by comparing with the industry values.
Why valuation ratios?
Valuation ratios are simple to calculate and easy to understand, because of that, they are commonly used and famous among investors. Also, it gives a clear idea about the earnings, sales, etc. of a company. Most of the valuation ratios are compared with its industry average to understand the position of the share of a company.