Investor Ratios Lecture Notes

A set of vocabulary flashcards covering key financial investor ratios, including formulas and their interpretations based on the lecture transcript.

Earnings per share (EPS)

A basic measure of a company's performance representing the amount of profit attributable to each ordinary share, calculated as $\frac{\text{Earnings}}{\text{Number of Ordinary Shares in Issue}}$. It does not represent actual income and uses earnings not directly linked to maximizing shareholder wealth.

Price/Earnings (PE) ratio

A measure of company performance expressing the amount shareholders are prepared to pay for a share as a multiple of current earnings, calculated as $\frac{\text{Share Price}}{\text{EPS}}$.

High PE ratio

An indicator that investors perceive a firm's earnings as high quality, which suggests a mixture of high growth expectations and/or lower risk expectations.

Dividend Per Share (DPS)

A ratio that helps individual ordinary shareholders determine the portion of the overall dividend payout they are entitled to, calculated as $\frac{\text{Total Dividend}}{\text{Total Number of Shares Issued}}$.

Dividend Cover

A measure of how many times the company's earnings could pay the dividend, calculated as $\frac{\text{Earnings}}{\text{Dividend for the Year}}$. A higher cover indicates a better ability to maintain dividends if profits drop.

Dividend Yield

A measure of wealth received by ordinary shareholders that does not account for capital growth, calculated as $\frac{\text{DPS}}{\text{Market Price Per Share}} \times 100$.

Total Shareholder Return (TSR)

A measure of investor income that considers both capital growth and dividend income, calculated as $\frac{\text{DPS} + \text{Change in Share Price}}{\text{Share Price at Start of Period}} \times 100$.

Interest Yield

A measure of interest on debt expressed as a percentage of the market price, calculated as $\frac{\text{Interest}}{\text{Market Value of Debt}} \times 100$.

Interest cover

Operating profit/ interest expenses

EPS growth

EPS Y2-Y1/Y1

Value per share

EPS x PE ratio

Total value of equity

Total earnings x PE ratio

TERP theoric ex-right price

MV share already in issue + proceed new shares / NB share after issue

Value of a right VOR

TERP - issue price

VoR per existing share

VoR / nb share needed to obtain a right

Earnings Yield

Inverse PE ratio

PE ratio = 1/ earning yields

Value per share = EPS × 1/earning yield

Total value equity (growth)

Earnings (1+g) / earning yield-g

Cost of preference share Kp

= D/Po

MV Irredeemable debt

I/kp if 6% = 6/0.r

Bank loan cost

% (1-T)

Dividend payout ratio

Dividend paid/ earnings x100

Dividend per share

Dividend paid/ nb sharss

Growth rate

(Do / Dn )1/n -1