™A company with a $2 billion equity market capitalization and $500 million of revenue has a P/S ratio of 4. Debt and cash are not inserted into that equity-value numerator.
Fundamentals
Price-to-sales ratio
Equity market capitalization divided by company revenue, or share price divided by sales per share. It is an equity-value multiple; enterprise value divided by revenue is the separate EV/Sales multiple.
Plain-English context
Why it matters
P/S compares the market value of common equity with company revenue. Keeping the numerator and denominator on the same equity basis prevents it from being confused with EV/Sales.
Do not insert enterprise value into equity P/S or treat revenue as if it were profit or cash available to shareholders.
Further reading and verification. Examples are hypothetical, not current quotes or recommendations. Product terms, tax treatment and market rules can change. SEC — Financial statement basics