Market-Based Financial Ratio:Earnings Per Share

June 9th, 2006 Comments off
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Continued from my last article, we now look at the financial ratio for assessing the Market Value of a company.

Essentially, these Market Based financial ratios are able to relate the company performance to the market for its shares

EARNINGS PER SHARE (EPS):

FORMULA

Earnings Available to Common Shareholders / Number of Shares Outstanding.

MEASURE WHAT

Indicates the amount of profit that has on average been earned by each share

SCORE/VALUE

A steadily increasing EPS is a hint that management is giving shareholders more for their money.

SALIENT POINTS TO NOTE

Earnings/net profit after deducting any profits owed to preference shareholders or minority interest. Re : the level of profit used is that profit that actually belongs to the ordinary shareholders

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Financial Accounting

 
 

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