Financial Ratios Used In
GLOBUS
Profitability Ratios
(as reported on pages 2 and 6 of the
GLOBUS
Statistical Review)
•
Earnings per share (EPS)
is defined as net income divided by the number of
shares of stock issued to stockholders. Higher EPS values indicate the company is
earning more net income per share of stock outstanding. Because EPS is one of the
five performance measures on which your company is graded (see p. 2 of the GSR)
and because your company has a higher EPS target each year, you should monitor
EPS regularly and take actions to boost EPS. One way to boost EPS is to pursue
actions that will raise net income (the numerator in the formula for calculating EPS).
A second means of boosting EPS is to repurchase shares of stock, which has the
effect of reducing the number of shares in the possession of shareholders.
•
Return on equity (ROE)
is defined as net income (or net profit) divided by total
shareholders’ equity investment in the business. Higher ratios indicate the company
is earning more profit per dollar of equity capital provided by shareholders. Because
ROE is one of the five performance measures on which your company is graded
(see p. 2 of the GSR), and because your company’s target ROE is 15%, you should
monitor ROE regularly and take actions to boost ROE. One way to boost ROE is to
pursue actions that will raise net profits (the numerator in the formula for calculating
ROE). A second means of boosting ROE is to repurchase shares of stock, which
has the effect of reducing shareholders’ equity investment in the company (the
denominator in the ROE calculation).
•
Operating profit margin
is defined as operating profits divided by net revenues
(where net revenues represent the dollars received from camera sales, after
exchange rate adjustments and any promotional discounts). A higher operating
profit margin (shown on p. 6 of the GSR) is a sign of competitive strength and cost
competitiveness. The bigger the percentage of operating profit to net revenues, the
bigger the margin for covering interest payments and taxes
and
moving dollars to
the bottomline. A bolded number for the operating profit margin shown in the
bottom section of page 6 of the GSR signifies the company has the best operating
profit margin of any company in the industry. Numbers that are shaded designate
companies with subpar margins, thus signaling a need for management to work on
improving profitability.
•
Net profit margin
is defined as net income (or net profit, which means the same
thing) divided by net revenues (where net revenues represent the dollars received
from camera sales, after exchange rate adjustments and any promotional
discounts). The bigger a company’s net profit margin (its ratio of net income to net
revenues), the better the company’s profitability in the sense that a bigger
percentage of the dollars it collects from camera sales flow to the bottomline.
The
net profit margin represents the percentage of revenues that end up on the bottom
line
. A bolded number for the net profit margin shown in the bottom section of page
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 Spring '08
 Erba,J
 Revenue, Generally Accepted Accounting Principles, Dividend yield, Credit rating

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