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5. MARKET RATIOS
- ALSO CALLED INVESTORS RATIO. RELATE A FIRM’S STOCK PRICE TO ITS EARNINGS AND BOOK VALUE PER
SHARE
Types of ratio Definition Formula Indicator
A) Earnings per Profit earned per
share unit of issued share ℎ ↑ Market
. ℎ
value will be
high the
B) Dividend per It indicate the firms stock
share amount of dividend price will
. ℎ
received by increase
ordinary
shareholder
C) Dividend Indicates the
ℎ
payout ratio proportion of ↑ The higher
ℎ
earnings that is P/E ratio
distribution high growth
dividend to potential
shareholder and low risk
It compares the
D) Price current market
earnings ratio price with earnings
ℎ
to establish
ℎ
whether a stock is
overvalued @
undervalued
E) Dividend Indicates dividend
yield per share received
by the shareholder
ℎ
with the current
market share price
