BUSI 2503 Chapter Notes - Chapter 2: Dividend Yield, Earnings Before Interest And Taxes, Cash Flow
13 Aug 2016
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Measures the profitability of a firm over a time period. Assists financial decision making and analysis, utilizing past patterns for predicting the timing, uncertainty, and amount of future earnings and cash flows. Gross profit: sales (revenue) cost of goods sold (direct costs related to sales). May contain some fixed costs but exclude overheads. Operating profit (earnings before interest and taxes): a measure of how efficient management is in generating revenues and controlling expenses. Gross profit selling and administrative expenses amortization. Earnings (net income or loss): operating profit is adjusted for revenues and expenses not related to operational matters. Interest reflecting the financing policies of the firm or its financial leverage, and taxes reflecting government policies are of particular note. Earnings per share (eps) = earnings available to common shareholders/number of share outstanding. Payout ratio = dividend per share/earnings per share. Price-earnings ratio (p/e ratio) = market share price/earnings per share.
