Market ratios
Book Value per Share Ratio : represents the per share amount
for the common shareholders that would result if the company
were to be liquidated at the amount that are reported on the
company’s balance sheet.
Total Shareholders’ Equity – Preferred Equity
Number of Common Shares Outstanding
Market to Book Ratio
The market/book ratio will be higher if the market expects abnormally
high future earnings or lower if the market expects abnormally low
future earnings.
The ratio should be more than 1.0 because:
The market value of a share includes fair market value while
the book value of a share includes only book value
Market Price of a Share
Book Value of a Share
Basic Earnings per Share
EPS is essentially the measure of the amount of income that each
share of common stock would have earned if the profit of the
company had been “paid” to all of the common shares
outstanding
Income Available to Common Shareholders
Weighted Avg. Number Common Shares Outstanding
Net Income
− Noncumulative preferred dividends declared
− Cumulative preferred dividends earned
= Income Available for Common Shareholders
This is the number of shares that were outstanding for the entire period.
Shares that were outstanding for only part of the year are multiplied by the
percentage of the year that they were outstanding
Shares that were issued as part of a stock split or dividend are considered to
have been outstanding for the entire year
Price/Earnings (P/E) Ratio
is an indication of what shareholders are paying for continuing
earnings per share
Market Price of a Share
Basic Earnings Per Share
The P/E ratio is greatly influenced by where a company is in its cycle:
A company in a growth stage will usually have a high P/E ratio because of the
market’s expectations of future profits.
Companies with low growth usually have lower P/E ratios
Price/EBITDA Ratio
is used to analyze a company’s operating profitability before non-
operating expenses and before non-cash charges
Market Price per Common Share
Diluted EBITDA per Share
Dividend Payout Ratio
Annual Dividend Per Common Share
Basic Earnings Per Share
or
Total Common Dividends (Annual)
Income Available to Common Shareholders
ratio measures the % of earnings paid as dividends to common stockholders.
a new or growing company will have a low or no dividend payout (it retains
earnings in company to finance growth)
Dividend Yield
Annual Dividends Per Common Share
Current Market Price Per Share
measures how much of the market price was paid in dividends. It is the cash
return received by a shareholder on one share of stock using the stock’s current
price and dividend.
If the firm keeps the dividend payout low to retain profits in the company,
the dividend yield will be low.
If the company invests the retained earnings profitably, the price of the
company’s stock should rise, providing return to investors as capital gain
rather than as dividends.
Shareholder Return Ratio
measures the return to individual shareholders on their personal
investments in the company’s common stock.
Ending Stock Price – Beginning Stock Price + Annual Dividends Per Share
Beginning Stock Price
