Financial Management
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Financial Management

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Presentation of Financial Management of Northern University Bangladesh Khulna Campus. ...

Presentation of Financial Management of Northern University Bangladesh Khulna Campus.
That is prepared as a requisite of this course. This is about some important bond and share information. Anyone can download this for their educational purpose or just for view. I try to prepare this my best. If any mistake found please forgive.
It is mentionable that it is presented in my class and only by me. Pray for me. Best wishes for all.

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Financial Management Financial Management Presentation Transcript

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  • The dividend yield or the dividend-price ratio on a company stock is the company's annual dividend payments divided by its market cap, or the dividend per share divided by the price per share. It is often expressed as a percentage. Its reciprocal is the Price/Dividend ratio. Copyright © Rayan Shamsi Copyright © Rayan Shamsi Dividend yield= Dividend per share Price per share Or Dividend yield= Total dividend Total Market price of outstanding share
  • Dividend payments on preferred shares are stipulated by the prospectus. The company will typically refer to a preferred share by its initial name which is the yield on its original price — for example, a 6% preferred share. However, the price of preferred shares varies according to the market so the yield based on the current price fluctuates. Copyright © Rayan Shamsi Preferred Share Dividend Yield
  • Unlike preferred stock, there is no stipulated dividend for common stock. Instead, dividends paid to holders of common stock are set by management, usually in relation to the company's earnings. There is no guarantee that future dividends will match past dividends or even be paid at all. Due to the difficulty in accurately forecasting future dividends, the most commonly-cited figure for dividend yield is the current yield which is calculated using the following formula: Copyright © Rayan Shamsi Current Dividend yield = Most Recent Full Year Dividend Current Share Price Common Share Dividend Yield
  • Most Recent Full Year Dividend Current share price Copyright © Rayan Shamsi Example, take a company which paid dividends totaling $1 per share last year and whose shares currently sell for $20. Its dividend yield would be calculated as follows: Current Dividend Yield = = = 0.05 = 5% $1 $20 Common Share Dividend Yield
    • The reciprocal of the divided yield is the Price/Dividend ratio. The dividend yield is related to the earnings yield via:
    • Earnings yield = dividend yield * dividend cover, and
    • Dividend yield = earnings yield * dividend payout ratio
    Copyright © Rayan Shamsi Related measures
    • The dividend yield of the Dow Jones Industrial Average, which is obtained from the annual dividends of all 30 companies in the average divided by their cumulative stock price, has also been considered to be an important indicator of the strength of the U.S. stock market. Historically, the Dow Jones dividend yield has fluctuated between 3.2% and around 8.0%.
    Copyright © Rayan Shamsi Dow Industrials
    • In 1982 the dividend yield on the S&P 500 Index reached 6.7%. Over the following 16 years, the dividend yield declined to just a percentage value of 1.4% during 1998, because stock prices increased faster than dividend payments from earnings, and public company earnings increased slower than stock prices. During the 20th century, the highest growth rates for earnings and dividends over any 30-year period were 6.3% annually for dividends, and 7.8% for earnings As of 2008, the average dividend yield is around 2%.
    Copyright © Rayan Shamsi S&P 500
    • Market capitalization (often market cap) is a measurement of the size of a business enterprise (corporation) equal to the share price times the number of shares outstanding of a public company.
    Copyright © Rayan Shamsi
  • Copyright © Rayan Shamsi Market capitalization represents the public consensus on the value of a company's equity. An entirely public corporation, including all of its assets, may be freely bought and sold through purchases and sales of stock, which will determine the price of the company's shares. that market capitalization is a market estimate of a company's value, based on perceived future prospects, economic and monetary conditions. Valuation
  • Copyright © Rayan Shamsi The term bonus means an extra dividend paid to shareholders in a joint stock company from surplus profits. When a company has accumulated a large fund out of profits - much beyond its needs, the directors may decide to distribute a part of it amongst the shareholders in the form of bonus.
    • Bonus can be paid either in cash or in the form of shares.
    • Cash bonus is paid by the company when it has large accumulated profits as well as cash to pay dividend.
    • A bonus share is a free share of stock given to current/existing shareholders in a company, based upon the number of shares that the shareholder already owns.
    • Because of unsatisfactory cash position, the company pays a bonus to its shareholders in the form of shares; a free share thus issued is known as a bonus share .
    Copyright © Rayan Shamsi Features of Bonus Share
    • Under a secondary market offering or seasoned equity offering of shares to raise money, a company can opt for a rights issue to raise capital. A rights issue is in contrast to an initial public offering (primary market offering), where shares are issued to the general public through market exchanges.
    Copyright © Rayan Shamsi
    • Issue rights the financial manager has to consider:
    • Engaging a Dealer-Manager or Broker Dealer to manage the Offering processes.
    • Selling Group and broker dealer participation.
    • Subscription price per new share .
    • Number of new shares to be sold.
    • The effect of rights on the value of the current share.
    • The effect of rights to shareholders of record and new shareholders and right-holders.
    Copyright © Rayan Shamsi Considerations
    • Rights issues may be underwritten. The role of underwritten is to guarantee that the funds sought by the company will be raised. The agreement between the underwriter and the company is set out in a formal underwriting agreement.
    Copyright © Rayan Shamsi
    • Mr. A had 100 shares of company X at a total investment of $40,000, assuming he purchased the shares at $400 per share.
    Copyright © Rayan Shamsi An Investor
    • Company X has 100 million outstanding shares. The share price currently quoted on the stock exchanges is $400 thus the market capitalization of the stock would be $40 billion (outstanding shares times share price).
    Copyright © Rayan Shamsi The Company
    • In general, net asset value per share is the price an investor would receive when selling a fund's shares back to the fund. Net asset value per share is similar in concept to book value per share for other types of firms.
    Copyright © Rayan Shamsi
    • Book value or carrying value is the value of an asset according to its balance sheet account balance.
    • Traditionally, a company's book value is its total assets minus intangible assets and liabilities.
    Copyright © Rayan Shamsi
    • An asset's initial book value is its actual cash value or its acquisition cost. Cash assets are recorded or "booked" at actual cash value. Assets such as buildings, land and equipment are valued based on their acquisition cost, which includes the actual cash cost of the asset plus certain costs tied to the purchase of the asset, such as broker fees.
    Copyright © Rayan Shamsi
    • Monthly or annual depreciation, amortization and depletion are used to reduce the book value of assets over time as they are "consumed" or used up in the process of obtaining revenue. These non-cash expenses are recorded in the accounting books after a trial balance is calculated to ensure that cash transactions have been recorded accurately.
    Copyright © Rayan Shamsi
    • The net asset value of a mutual fund is the market value of assets owned by the fund minus the fund's liabilities. A mutual fund is an entity which primarily owns "financial assets" or capital assets such as bonds, stocks and commercial paper.
    • In the United Kingdom, the term net asset value may refer to book value.
    Copyright © Rayan Shamsi
  • Copyright © Rayan Shamsi A corporation's book value is used in fundamental financial analysis to help determine whether the market value of corporate shares is above or below the book value of corporate shares.
    • Tangible common equity is calculated as total book value minus intangible assets, goodwill, and preferred equity, and can thus be considered the most conservative valuation of a company and the best approximation of its value should it be forced to liquidate.
    • Obscure variation of book value, tangible common equity, has recently come into use by the U.S. Federal Government in the valuation of troubled banks
    Copyright © Rayan Shamsi
    • To clearly distinguish the market price of shares from the core ownership equity or shareholders' equity, the term 'book value' is often used since it focuses on the values that have been added and subtracted in the accounting books of a business (assets - liabilities).
    • The term is also used to distinguish between the market price of any asset and its accounting value which depends more on historical cost and depreciation.
    Copyright © Rayan Shamsi
    • While it can be used to refer to the business' total equity, it is most often used:
    • As a 'per share value': The balance sheet Equity value is divided by the number of shares outstanding at the date of the balance sheet (not the average o/s in the period).
    • As a 'diluted per share value': The Equity is bumped up by the exercise price of the options, warrants or preferred shares. Then it is divided by the number of shares that has been increased by those added.
    Copyright © Rayan Shamsi
  • Uses Copyright © Rayan Shamsi
    • Book value is used in the financial ratio price/book.
    • Book value per share can be used to generate a measure of comprehensive earnings, when the opening and closing values are reconciled.
    Evaluation: Book Value Per Share, end of year = Book Value Per Share, beginning of year - Dividends + ShareIssuePremium + Comprehensive EPS
    • The sale of shares/units by the business increases the total book value.
    • The purchase of its own shares by the business will decrease total book value.
    • Dividends paid out will decrease book value and book/sh.
    • Comprehensive earnings/losses will increase/decrease book value and book/sh.
    Copyright © Rayan Shamsi Changes are caused by
    • The issue of more shares does not necessarily decrease the value of the current owner. While it is correct that when the number of shares is doubled the EPS will be cut in half, it is too simple to be the full story. It all depends on how much was paid for the new shares and what return the new capital earns once invested.
    Copyright © Rayan Shamsi
    • Book value is often used interchangeably with "net book value" or "carrying value," which is the original acquisition cost less accumulated depreciation, depletion or amortization
    Copyright © Rayan Shamsi
  • Diluted net asset value per share figure shows the net assets per common share after assuming the exercise of all outstanding warrants and stock options, and the conversion of convertible bonds and preferred stock, all potentially dilutive securities. This NAV figure is usually available only for Investment and Insurance Companies. Copyright © Rayan Shamsi
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