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Business planning. Investment indicators (most important)

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45. INVESTMENT PERFORMANCE

Investment ratios characterize the value and profitability of the company's shares. The indicators of this group are calculated at the end of the year.

Earnings per share (Earning per ordinary share) shows what share of net profit falls on one ordinary share in circulation. Shares outstanding are defined as the difference between the total number of ordinary shares in issue and the treasury shares in the portfolio. If the company's capital structure contains preferred shares, the amount of dividends paid on them must first be deducted from net profit. It should be noted that this indicator has a significant impact on the market value of the company's shares:

Earnings per share = (Net income - Dividends on preferred shares) / Number of common shares.

Dividend per share (Dividends per ordinary share) - this indicator determines the amount of dividends per each ordinary share and is equal to the ratio of the amount of dividends on ordinary shares to the number of ordinary shares: Dividends per share = Amount of dividends / Number of ordinary shares.

Dividend coverage ratio (ordinary dividend coverage) demonstrates the company's ability to pay dividends from profits. It indicates how many times dividends can be paid out of the company's net income.

Dividend coverage = (Net income - Dividends on preferred shares) / Dividends on common shares.

Share Price to Earnings Ratio {price to earnings) shows how many monetary units shareholders are willing to pay for one monetary unit of the company's net profit.

Share price to earnings ratio = Market price per share / Earnings per share.

The market value of an ordinary share is calculated by dividing equity by the number of ordinary shares.

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