Market-Based Financial Ratio:Earnings Per Share
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):
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FORMULA |
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Earnings Available to Common Shareholders / Number of Shares Outstanding. |
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MEASURE WHAT |
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Indicates the amount of profit that has on average been earned by each share |
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SCORE/VALUE |
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A steadily increasing EPS is a hint that management is giving shareholders more for their money. |
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SALIENT POINTS TO NOTE |
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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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