3.4 interpreting published accounts (part 3) - moodle

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3.4 interpreting published accounts (part 3) - moodle

  1. 1. Do Now – Ratio Analysis
  2. 2. Interpreting published accounts (Part 3)
  3. 3. Learning ObjectivesYou should now be able to:1. Understand how to select, calculate and interpret financial ratios to assess performance.2. Understand the meaning and significance of specific financial strategies and how they interlink in functional areas.
  4. 4. Shareholder Ratios Shareholder ratios help measure the value of the return to a shareholder. There are two main measures: Dividend per share (DPS) Dividend yield
  5. 5. SHAREHOLDER RATIOS (Dividend per share – DPS) This is a calculation of how many pence per share a shareholder can expect to receive in dividends. Dividends can be paid on an interim basis as well as at the end of a year, but it is the total dividend for the year that is calculated.Dividend per share = Total Dividends Dividend per share = £400m = 0.72 No of issued shares 550 This means that for every share owned, a shareholder will receive 72p. A shareholder may be willing to accept a lower dividend per share payment in the short-run if profits are to be reinvested for the long-term good of the business. When making a judgement as to whether it is a good payment, you would have to consider how much the share was purchased for and also current market conditions.
  6. 6. SHAREHOLDER RATIOS (Dividend yeild) This is a measure of the dividend received as a rate of return compared to the current market share price. It allows for a more meaningful comparison of the value of investment in relation to other investments.Dividend yield = Dividend per share x 100 Dividend yield = 0.72 = 6.37 Market share price 11.30 A yield of 6.37% means that if a dividend of £1 was received, the expected value of the share would be £6.50. A shareholder could compare this to other share dividend yields and also to the rate of interest that could be achieved if the shares were sold and the money invested in the bank. Market share prices will be quoted via the Stock Exchange so are open to going both up and down.
  7. 7. Your turn!Calculate the Dividendper share and Dividendyield ratios for AlquimiaPlc.What can you infer from Where doesthe analysis? the information come from?
  8. 8. Practice makes perfectCompleted the ratioanalysis for Out andAbout Plc.What can you infer fromthis information?
  9. 9. Re-cap Learning ObjectivesYou should now be able to:1. Understand how to select, calculate and interpret financial ratios to assess performance.2. Understand the meaning and significance of specific financial strategies and how they interlink in functional areas.

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