Yield Ratio is a key financial metric used by investors to evaluate the returns generated by a stock, bond, or other income-generating security in relation to its price or cost. It helps measure how efficiently an investment generates income, allowing investors to compare potential returns across different assets.

In simple terms, the Yield Ratio represents the percentage of income (such as dividends or interest) earned on an investment relative to its market value or purchase price. For example, if a company pays _5 per share in annual dividends and its share price is _100, the yield ratio is 5%. This helps investors assess whether a stock or bond provides adequate returns for the associated level of risk.

There are various types of yield ratios depending on the investment category. The Dividend Yield Ratio is widely used in equity markets to evaluate the annual dividend income from a stock compared to its current price. Similarly, the Bond Yield Ratio indicates the interest income earned from fixed-income securities. In both cases, a higher yield may indicate better returns, but it’s essential to consider factors such as company stability, market volatility, and inflation.

Investors often use yield ratios alongside other metrics like price-to-earnings (P/E) ratio and earnings per share (EPS) to make well-rounded investment decisions. However, yield ratios should not be the sole criterion for investment selection, as high yields may also signal higher risk or financial instability.

Understanding the Yield Ratio helps investors build a balanced portfolio by comparing income potential across equities, bonds, and mutual funds. It encourages disciplined investing aligned with financial goals, ensuring informed decision-making within SEBI’s regulatory framework.