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Unformatted text preview: f. Details of changes during the year g. Restrictions on retained earnings Section 3862 f the Handbook requires additional disclosures of any significant terms and conditions of equity instruments that might affect the amount, timing, and uncertainty of future cash flows. Analyze Shareholders Equity 41. A number of ratios are used to evaluate a companys profitability and long-term solvency. Common ratios used are: a. Rate of return on common shareholders equity : This ratio measures profitability from the common shareholders perspective. This ratio shows how many dollars of net income were earned from each dollar invested by the investors. It is calculated as: net income-preferred dividends/average common shareholders equity. b. Payout ratio : This is the ratio of cash dividends to net income. This is an important ratio to some investors who are looking for good yield on the shares. It is calculated as: cash dividends/net income-preferred dividends....
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- Spring '10