Business Administration - Financial Planning RFC125 Lecture Notes - Lecture 3: Historical Cost, Profit Margin, Dividend Yield
28 May 2018
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VALUATION RATIOS- chap 2
• Valuation ratios are used to assess how the market is valuing the firm
(i.e., its share price) in relation to its assets, earnings, profits and
dividends; these include:
– Equity book value per share (BVPS)
– Dividend yield
– Dividend payout
– Price-earnings (P/E)
– Market-to-book
VALUATION RATIOS
• The price-earnings (P/E) ratio is an earnings multiple based on the most
recent earnings
• The price-earnings (P/E) ratio is often used to estimate the value of a
stock
• Example: A stock trading at a P/E multiple of 10 will take 10 years at
current earnings to recover its price
• The forward P/E ratio is an earnings multiple based on forecast earnings
per share and is often used to estimate the value of a stock for
companies with rapid growth in EPS
• Low P/E shares are regarded as value stocks
• High P/E shares are regarded as growth stocks
VALUATION RATIOS
• The market-to-book ratio estimates the dollars of share price per dollar
of book value per share, as in Equation 4-30:
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Document Summary
Valuation ratios- chap 2: valuation ratios are used to assess how the market is valuing the firm (i. e. , its share price) in relation to its assets, earnings, profits and dividends; these include: Market-to-book: the price-earnings (p/e) ratio is an earnings multiple based on the most. Low p/e shares are regarded as value stocks: the market-to-book ratio estimates the dollars of share price per dollar. The shannon corporation has sales of ,000, all on credit and cogs of ,000. Given the following ratios, fill in the balance sheet below. Dupont analysis: reveals the relationships between profitability ratios and asset, decomposes a firm"s profitability into several determining factors utilization ratios and debt utilization ratios. Problem 2: using the dupont method evaluate the effects of the following, a. lollar corp has a profit margin of 5 percent and its return on assets ( relationships for the lollar corp.
