Drawing a perfect circle is quite easy to do in Photoshop. Use the Ellipse Tool and hold down the "Shift" key to lock its height and width to the same proportions. Once the circle is created, you can change the formatting in whatever way you need. The same trick works when using the Elliptical Marquee Tool to trace a perfect circle on any object in your canvas.
Using the Ellipse Tool
Select the "Ellipse Tool" from the Photoshop Toolbox. If it isn't visible, click the bottom-right corner of whichever shape tool in its group that is visible -- like the Rectangle or Line Tool -- to reveal the Ellipse Tool in the drop-down menu.
Drag the Ellipse Tool over the canvas while holding down the "Shift" key. The Shift key locks the ellipse's aspect ratio so the height and width are of the same dimension. The height and width both appear beside the cursor as you drag it, which can be a helpful feature when you need a circle of a specific size.
Resize the circle at any time after you draw it by changing the "Width" and "Height" in the Options bar. The chain-link button between these two fields locks them together so if you change one dimension, the other changes automatically. To move the circle, select the "Move Tool" from the Toolbox and drag the circle to where you want it to be.
Click the "Stroke Options" menu in the Options bar to change the border of the circle from a straight line to a dashed line or a dotted line.
Click the "Weight" menu to change the thickness of the line. You can enter a thickness manually or drag the Slider to increase or decrease line weight.
Click the "Stroke" menu to change the line color, or the "Fill" menu to change the fill color. The menu is identical for both. For example, click the first button with a line through it to select "No Color." You can also select a pattern or gradient. Clicking the rainbow-colored "Color Picker" button in the upper-right corner opens additional color options.
Using the Elliptical Marquee Tool
Select the "Elliptical Marquee Tool" from the Toolbox if you want to draw a circle on an object for the purpose of cutting or to create other effects in an existing image. If the Elliptical Marquee Tool isn't visible, click the bottom-right corner of the Marquee Tool that is visible to reveal it.
Hold down the "Shift" key and drag the cursor over the canvas to draw a circle.
Press "Delete" to erase the pixels inside the circle. You can also paint inside the circle, apply a Layer Mask to the area inside the circle, or use any other Photoshop effects as needed. To remove the Elliptical Marquee Tool selection when you're finished, press "Ctrl-D."