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Accounting Profitability Measures

Accounting Profitability Measures - investors expect from...

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Profitability measures: Return on investment (ROI): The return earned on assets invested. This is a key profitability measure. Average ROI ranges between 8% and 12% in America Return on equity (ROE): The return on the portion of assets provided by the owners of the entity. Average ROE ranges between 10% and 15% in America. Price/earnings ratio (P/E Ratio): The relative expensiveness of a share of a firm’s common stock. It shows how much investors are willing to pay for the stock relative to earnings. The higher the value, the greater future earnings and dividend payments
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Unformatted text preview: investors expect from companies. • Dividend yield: The amount of dividends a company pays out relative to it share price. (The average dividend yield on common stocks has been between 3% and 6%.) • Dividend payout ratio: The portion of earnings paid as dividends to stockholders. This estimates dividends of future years if earnings can be estimated. (Average range is from 30% to 50% although the range can vary by a lot if the company has a low earnings year but wants to maintain the dividends per share amount.)...
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