Dividend Yield = Dividends per common share

Market Price per common share

Return on investment (per share)
Out of how much I paid for the stock, how much is my returns
Market Price is high for a high-growth company, but they may want to reinvest the profits bac
the company, hence give low dividends
hence dividend yield is low
But then, if the RoE is high or average, investors are happy
since

Return on Equity = Net Income

Shareholder's Equity

If you are investing to get current income/returns, look for high dividend yield
 how effectively management is using a company’s assets to create profits.
utilities have many assets and debt on the balance sheet compared to a relatively small amou
 A technology or retail firm with smaller balance sheet accounts relative to net income may ha
 A normal ROE in the utility sector could be 10% or less.

Price to Earnings Ratio = Market Price per share

Diluted EPS before nonrecurring items

Tells the multiplication factor by which the stock has been selling
eg. If 19
the stock has been selling for about 19 times the earnings
Compare with competitiors ratio, average P/E for industry

Guaged as the future earning power of the firm

High growth companies have high P/E ratio
Low growth companies have low P/E ratio
Buy a stock that has low P/E ratio but the prospects for the company are better than reflected

If the firm has very little profits, abnormally low profits in relation to the asset base (RoA)
or when a firm has losses. In those cases, P/E would be abnormally high or negatvie
as the net income in the EPS ratio would be low, therefore low EPS and lower denominator in
because

Earnings Per Share = Net income - preferred dividends

Weighted average number of common shares outstanding

Amount of income earned per share during an accounting period

applies to common stock
Diluted EPS = Net income - preferred dividends
Weighted average number of common shares outstanding p

Company generally presents this on the bottom of the income statement

Weighted average number of common shares outstanding plus dilutive securities
Dilutive securities contain - convertible securities, warrants, options and other rights
which increase the denom and hence dilute the earnings per share
Dil EPS is lower than EPS

Cash Flow EPS = Cash flow from operating activities

average number of diluted outstanding shares

gives the real picture of EPS since cash flow net shows how much cash we actually have
Net income contains depreciation - that;s non-cash expense
it contains sales recognized on receivables and COGS on accounts payable

If Cash flow is less than net income

means more cash outflow -
assets have increased
sales done on receivable hence cash inflow not recognized a

If Cash flow is more than net income

means more cash outflow -
suppliers havent been paid off hence cash outflow not recog
Depreciation a non -cash expense could be large and reduce

EPS includes non cash expenditures such as impairment losses, write downs, D&A and is thus
CEPS, being a cash measure, is tougher to manipulate, and helps investors gauge the real cash
Buying back stock artificially inflates EPS, this is not the case w CEPS

RoCE
Return on capital employed = EBIT
Capital employed

Capital Employed = Total Assets - Current Liabilities

assessing a company's profitability and capital efficiency

in other words, the ratio can help to understand how well a company is generating profits fro
ROCE is similar to return on invested capital ROIC

RoA
Return on Assets = Net Income
Total Assets
How much income it is making with the amount of assets it has
ant to reinvest the profits back into

ividend yield

ed to a relatively small amount of net income.

elative to net income may have normal ROE levels of 18% or more.

any are better than reflected in the ratio

n to the asset base (RoA)

ly high or negatvie
PS and lower denominator in P/E hence higher P/E ratio

ommon shares outstanding

ommon shares outstanding plus dilutive securities

ilutive securities
ons and other rights

tanding shares

cash we actually have

CEPS < DilEPS

cash inflow not recognized and subtracted from net incoem

CEPS > DilEPS

hence cash outflow not recognized (acc payable high)

se could be large and reduced net income but doesn’t reduce the cash flow

rite downs, D&A and is thus easier to manipulate

investors gauge the real cash flow

pany is generating profits from its capital.