Investor Ratios

Question 1

What is the formula for Earnings per share?

Answer 1

Earnings (profit after tax) / Number of issued ordinary shares

This ratio indicates the portion of a company’s profit allocated to each outstanding share of common stock.

Question 2

How is Price earnings calculated?

Answer 2

Current Market Price / Earnings per share

This ratio reflects the market’s expectations of a company’s future financial performance.

Question 3

What does Dividend yield measure?

Answer 3

Dividend per share / Market price per share x 100

This ratio indicates how much a company pays out in dividends each year relative to its stock price.

Question 4

What is Dividend cover?

Answer 4

Profit after interest and tax / ordinary share dividends paid

This ratio measures the ability of a company to pay dividends to its shareholders.

Question 5

What is the Interest cover equation?

Answer 5

Profit before interest and Tax / Interest payable

This ratio assesses a company’s ability to meet its interest obligations from its earnings.