Measuring Share Performance

Question 1

Explain Earnings Per Share

Answer 1

Amount of profit after tax and preference share dividends for each ordinary share

Question 2

EPS formula

Answer 2

Number of ordinary shares

Question 3

What is return on Capital Employed (ROCE)

Answer 3

% return achieved on the capital employed(net assets) in the business

Question 4

ROCE formula (return on capital employed)

Answer 4

trading profit before interest and taxation
-----------------------------------------------------------
capital employed (net assets)

Question 5

What is P/E ratio?

Answer 5

establishes how well a business can continue to generate earnings. High P/E means shares are in high demand

Question 6

P/E ratio formula

Answer 6

P/E ration = Market price of share
————————————
earnings per share

Question 7

What is Liquidity ratio (acid test) measure

Answer 7

Shows hoe easily a company can meet a sudden cash call

Question 8

Liquidity ratio formula

Answer 8

Liquidity cover = current assets - stock
———————————-
current liabilities

Question 9

Return on Equity - what does it measure?

Answer 9

measures % return the company is achieving on the amount of funds provided by shareholders

Question 10

Return on equity forumla

Answer 10

Capital and reserves (shareholders funds)

Question 11

What is interest cover?

Answer 11

shows how well a company can repay debt by stating how many times interest payments are covered by gross profits

Question 12

Interest cover formula

Answer 12

gross interest payable

Question 13

what does Dividend Cover measure?

Answer 13

indicates how likely a company will maintain its dividend payments

Question 14

dividend cover formula

Answer 14

Net dividend per share

Question 15

formula to calculate dividend yield %

Answer 15

net dividend per share
——————————— x 100
share price