Investment Valuation Ratios

Question 1

Earnings per share (EPS)

Answer 1

The amount in pence the company earned
during the year for each ordinary share

Profit attributable to ordinary shareholders / number of ordinary shares in issue

Question 2

Dividend yield

Answer 2

Measures yield as a percentage return on the share price

Dividend per share / current share price x 100

Question 3

Dividend cover

Answer 3

Measures how many times the dividend can be paid out of available current earnings

Earnings per share / dividend per share

Question 4

Price earnings ratio (P/E ratio)

Answer 4

Measures how highly investors value the
earnings of a company

Current market price of share / earnings per share

Question 5

Net Asset Value (NAV)

Answer 5

Measures amount available to shareholders if company were to sell all assets, pay all liabilities and distribute
balance to shareholders

(Price to book ratio divides share price by
NAV per share)

Net assets distributable to ordinary shareholders / number of ordinary shares in issue

Question 6

Projected earnings growth

Answer 6

Projected earnings per share - earnings per share
———————————————————————– x 100
Earnings per share