Business Administration - Management FIS403 Lecture Notes - Lecture 2: Retained Earnings, Accounts Receivable, Deferral

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30 May 2018

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Sample Valuation Ratio Calculations

EPS

Earnings available to common shareholders

Number of Shares Outstanding

12,900

2,000

= $6.45

P/E ratio

Market Share Price

Earnings per Share

Assume a current share price of $85 per share

85/6.45 = 13.17

How can we use these ratios to evaluate a company?

 Payout Ratio - % of current EPS paid out as dividends

 Dividend Yield - % return from dividends if buy shares at the

current market price

Sample Valuation Ratio Calculations

Payout Ratio

Dividend per share

Earnings per share

Assume dividend of $1.45/share

1.45

6.45

=0.2248 or 22.48%

Dividend Yield

Dividends per share

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