Financial Ratios Flashcards
What are the profitability and return ratios?
Return on Capital Employed - PBIT/ Capital Employed x 100.
Capital employed = Total assets - current liabilities or Share capital + reserves + long term loans.
Return on Equity - profit after tax and Pref Divs/Shareholders funds x 100
What are the debt and gearing ratios?
Interest Cover - Operating profit before I and T/ Debt interest.
- How well can a company cover it’s interest payments.*
- Lower is worse.*
What are the investor ratios?
Earnings per share - PBIT - Pref Divs/ No. ordinary shares in issue.
does not represent actual income.
Price/Earnings ratio - Share price/EPS or Total share value/Total earnings.
High PE = firms earning perceived as high quality.
Dividend per share - Total ordinary dividend/total shares issued.
Dividend Cover - Profit available for ordinary shareholders/Dividend for year.
How many times could earnings pay the dividend?
Dividend Yield - DPS/Market price per share
Compare against return from fixed rate investment.
Total Shareholder return - DPS + change in share price/ share price at start of period.
helps with comparing returns between investments.
Interest Yield - Interest/Market value of Debt.
Measure of return on investment for Debt holder.
