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DEFINITION
OF TERMS IN
RELATION TO
STOCKS
ALAN S. ABERILLA
STOCKS – Share in the ownership of a company
DIVIDEND – Share in the company’s profit
DIVIDEND PER SHARE – Ratio of the dividend to the number of shares
STOCK MARKET – A place where stocks can be bought or sold. The stock market in
the Philippines is governed by the Philippine Stock Exchange (PSE)
MARKET VALUE – The current price of a stock at which it can be sold
STOCK YIELD RATIO – Ratio of the annual dividend per share and the market value
per share. Also called current stock yield
PAR VALUE – The value per share amount as stated on the company certificate.
Unlike market value, it is determined by the company and remains
stable over time
Example 1. A certain financial institution declared a P 30,000,000.00 dividend for
the common stocks. If the are a total of 700,000.00 shares of common stock, how
much is the dividend per share?
Given: Total Dividend = P 30,000,000.00
Total Shares = P 700,000.00
Find: Dividend per Share
Solution:
Dividend per Share = Total Dividend / Total Shares
= P 30,000,000.00 / P 700,000.00
= P 42.86
Therefore, the dividend per share is P 42.86
Example 3. Corporation A, with a current market value of P 52.00, gave a dividend of P
8.00 per share for its common stock. Corporation B, with a current market value of P
95.00, gave a dividend of P 12.00 per share. Use the stock yield ratio to measure how
much dividends shareholders are getting in relation to the amount invested.
Corporation A:
Given: Dividend Per Share = P 8.00
Market Value = P 52.00
Find: Stock Yield Ratio
Solution:
Stock Yield Ratio = Dividend Per Share / Market Value
= P 8.00 / P 52.00
= 0.1538 = 15.38%
Corporation B:
Given: Dividend Per Share = P 12.00
Market Value = P 95.00
Find: Stock Yield Ratio
Solution:
Stock Yield Ratio = Dividend Per Share / Market Value
= P 12.00 / P 95.00
= 0.1263 = 12.63%
Corporation A has a higher stock yield ratio than Corporation B. Thus, each peso would
earn you more if you invest in Corporation A that in Corporation B.
The stock yield ratio can be used to compare two or more investments.
ACTIVITY 10
Solve the following:
1. A financial institution declared a dividend of P 75,000.00 for its common stock.
Suppose there are 900,000 shares of common stock, how much is the dividend per
share?
2. The ABC corporation gave out P 38.00 dividend per share for its common stock. The
market value of the stock is P 108.00. Determine the stock yield ratio.
3. A bank declared a dividend of P 27.00 per share for the common stock. If the common
stock closes at P 93.00, how much is the stock yield ratio on this investment?
References: Hart, William: Mathematics of Investment ; Department of Education, General Mathematics
KEEP SAFE
GOOD LUCK
GOD BLESS
Sir A

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Lesson 11 definitation of terms in relation to stocks

  • 1. DEFINITION OF TERMS IN RELATION TO STOCKS ALAN S. ABERILLA
  • 2. STOCKS – Share in the ownership of a company DIVIDEND – Share in the company’s profit DIVIDEND PER SHARE – Ratio of the dividend to the number of shares STOCK MARKET – A place where stocks can be bought or sold. The stock market in the Philippines is governed by the Philippine Stock Exchange (PSE) MARKET VALUE – The current price of a stock at which it can be sold STOCK YIELD RATIO – Ratio of the annual dividend per share and the market value per share. Also called current stock yield PAR VALUE – The value per share amount as stated on the company certificate. Unlike market value, it is determined by the company and remains stable over time
  • 3. Example 1. A certain financial institution declared a P 30,000,000.00 dividend for the common stocks. If the are a total of 700,000.00 shares of common stock, how much is the dividend per share? Given: Total Dividend = P 30,000,000.00 Total Shares = P 700,000.00 Find: Dividend per Share Solution: Dividend per Share = Total Dividend / Total Shares = P 30,000,000.00 / P 700,000.00 = P 42.86 Therefore, the dividend per share is P 42.86
  • 4. Example 3. Corporation A, with a current market value of P 52.00, gave a dividend of P 8.00 per share for its common stock. Corporation B, with a current market value of P 95.00, gave a dividend of P 12.00 per share. Use the stock yield ratio to measure how much dividends shareholders are getting in relation to the amount invested. Corporation A: Given: Dividend Per Share = P 8.00 Market Value = P 52.00 Find: Stock Yield Ratio Solution: Stock Yield Ratio = Dividend Per Share / Market Value = P 8.00 / P 52.00 = 0.1538 = 15.38%
  • 5. Corporation B: Given: Dividend Per Share = P 12.00 Market Value = P 95.00 Find: Stock Yield Ratio Solution: Stock Yield Ratio = Dividend Per Share / Market Value = P 12.00 / P 95.00 = 0.1263 = 12.63% Corporation A has a higher stock yield ratio than Corporation B. Thus, each peso would earn you more if you invest in Corporation A that in Corporation B. The stock yield ratio can be used to compare two or more investments.
  • 6. ACTIVITY 10 Solve the following: 1. A financial institution declared a dividend of P 75,000.00 for its common stock. Suppose there are 900,000 shares of common stock, how much is the dividend per share? 2. The ABC corporation gave out P 38.00 dividend per share for its common stock. The market value of the stock is P 108.00. Determine the stock yield ratio. 3. A bank declared a dividend of P 27.00 per share for the common stock. If the common stock closes at P 93.00, how much is the stock yield ratio on this investment? References: Hart, William: Mathematics of Investment ; Department of Education, General Mathematics