Investment Flashcards
What are the investment ratios
Earnings per share, dividend yield ratio and the price/earnings ratio
What does the earnings per share ratio do
It compares the profit available to shareholders to the number of shares in issue
What can the earnings per share ratio help to do
It can help assess invesment potential by looking at trends in EPS over time
What is the equation for the earnings per share ratio
Earnings per share = net profit / number of ordinary shares in issue
What does the dividend yield ratio do
It compares the dividend per share to the market value of money the share
What can the dividend yield ratio compare
The dividend yield to the returns on other investments
What may a high dividend yield indicate
That profits are being paid out as dividends rather than being reinvested into the company
Do you need to calculate the dividend yield
No you just need to know what it measures
What does the price/earnings ratio compare
It compares the market value of a share to the earnings per share
What can the P/E ratio help asses
The investment potential as it measures the markets view on company’s prospects
How is the P/E ratio expressed
As a number of times
Do you need to know how to calculate a P/E ratio
No you just need to know what it measures
