the right questions to ask

The third part in our series on The Right Questions to Ask About Stocks takes a look at a company's growth. We've learned about the earnings of a company and how to relate it to the price of the stock via the price to earnings ratio. Once we've compared the stock's price to its earnings, the next thing we want to know is whether those earnings will increase or lessen.

The second part in our series on The Right Questions to Ask About Stocks takes a look at the price to earnings ratio, or P/E ratio. As you might expect the P/E ratio helps us determine the relationship between a company's price and its earnings. In a very real sense it tells us how much we're paying per dollar of earnings the company makes. This can help give us a base line to start researching a stock.

So we all have a rough idea of what earnings are, but what exactly do they mean in the corporate world? Ultimately, earnings are how much money a company made after all its expenses were deducted. The way we arrive at the number is pretty complex, but it at least gives us an answer to a simple question: Is the company making money?