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Day 6

Higher earnings per share indicates a company is earning more profits for shareholders and has more efficient business prospects. A company's earnings power value determines if its stock is overvalued, undervalued or fairly valued by comparing to current market price. EBIT is calculated by subtracting cost of goods sold, operating expenses from revenue or by subtracting operating expenses from operating revenue and non-operating income. A good current ratio is between 1.2 to 2, meaning the business has over twice as many current assets than liabilities.

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50 views1 page

Day 6

Higher earnings per share indicates a company is earning more profits for shareholders and has more efficient business prospects. A company's earnings power value determines if its stock is overvalued, undervalued or fairly valued by comparing to current market price. EBIT is calculated by subtracting cost of goods sold, operating expenses from revenue or by subtracting operating expenses from operating revenue and non-operating income. A good current ratio is between 1.2 to 2, meaning the business has over twice as many current assets than liabilities.

Uploaded by

Reyu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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What happens when earnings per share increases?

A higher or increasing earnings per share indicates that the company is earning more
profits to distribute to its shareholders. Higher or increasing growth on EPS gives a
good indication about the company's efficiency on its business prospects.

What is the importance of earning power?

The earnings power value is used to determine whether a company's stock is


overvalued, undervalued, or fairly valued. A company's stock is undervalued if the
earnings power value per share of its stock is higher than the current market price of the
stock.

How do you calculate EBIT?

How Is EBIT Calculated? EBIT is calculated by subtracting a company's cost of goods


sold (COGS) and its operating expenses from its revenue. EBIT can also be calculated
as operating revenue and non-operating income, less operating expenses.

What is a good current ratio?

A good current ratio is between 1.2 to 2, which means that the business has 2 times
more current assets than liabilities to covers its debts. A current ratio below 1 means
that the company doesn't have enough liquid assets to cover its short-term liabilities.

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