lecture_18_analysis_of_accounts_2

lecture_18_analysis_of_accounts_2 - MA826 18 Analysis of...

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MA826 18- Analysis of Accounts 2
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Measures used by investors in shares Ordinary shareholders main concern is current and future income prospects resulting from company’s profitability, efficiency, earnings and dividends. Ratios used by investors are in four broad groups Ratios involving share information Profitability Ratios Liquidity Ratios Efficiency ratios
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Earnings per Share Definition EPS = Earnings on ordinary activities Number of issued shares “Earnings” excludes dividend payments to preference shareholders
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Earnings per Share Two type of EPS : Basic earnings per share Divides the net profit for the period by the weighted average number of ordinary shares outstanding during the period Diluted earnings per share Adjusts the basic EPS for the effect of all dilutive potential ordinary shares.
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Price/Earnings ratio Definition Market Price of an ordinary share Earnings per share EPS figure Historic Prospective
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Price/Earnings ratio P/E ratio would depend on : Depreciation rate used Potential number of shares that could exist if all securities were converted. P/E ratio reflects market opinion of the company’s performance. If PE ratio high relative to similar companies, it may
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This note was uploaded on 06/07/2011 for the course MA 826 taught by Professor Loba,millet during the Spring '11 term at Kent Uni..

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lecture_18_analysis_of_accounts_2 - MA826 18 Analysis of...

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