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Finance for Business > Week 3 > Flashcards

Week 3 Flashcards

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1
Q

Ratio analysis: market value ratios

A

Earnings per share
Price earnings ratio
Price earnings growth ratio

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2
Q

Market value measures…

A

Long term success of the company and shareholder value/returns

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3
Q

Earnings per share

A

Measures net income generated per share

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4
Q

Price earnings ratio

A

Measures how much investors are willing to pay per unit of current earnings

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5
Q

Price earnings growth ratio

A

Indicates whether shares are overvalued or undervalued against projected earnings growth rates

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6
Q

Market value per share =

A

Share price

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7
Q

Book value per share =

A

Total equity in accounts / number of shares

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8
Q

Market value of equity

A

Share price x number of shares

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9
Q

Market to book ratio

A

Indicates how successful a company has been overtime in creating value for its shareholders

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10
Q

Tobins Q

A

Compares market value of assets with cost of setting up similar company

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11
Q

Ratio analysis: The Du Pont Identity

A

Popular way of decomposing ROE into different parts

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12
Q

ROE is affected by

A

Operating efficiency, asset use efficiency and financial leverage

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13
Q

Operating efficiency

A

Net income / sales

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14
Q

Asset use efficiency

A

Sales / assets

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15
Q

Financial leverage

A

Assets / total equity

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16
Q

Time trend analysis

A

Looks at the same ratio over a number of years

17
Q

Peer group analysis

A

Compares ratio with similar firms

Companies in same industry

18
Q

Inappropriate peers

A

Some companies operate in several industries

19
Q

Aspirant analysis

A

Comparing your firm with the best in industry

20
Q

Sources of information

A

Financial websites and company accounts

Finance for Business (5 decks)

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