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SHAREHOLDER RATIOS

Introduction

People that have bought shares in a firm (or wondering whether to buy shares) will be interested in how much money (return) the firm can generate for them. Shareholders receive a return from shares in two ways:

  1. When the shares go up in value, so that if the shareholder decides to sell their shares, they will get back more money than they paid for the shares.
  2. The second return is if the firm decide to give the shareholders some of the profit money it has made; this type of return is known as a dividend.

Shareholder ratios diagram

There are three ratios which analyse the return shareholders are receiving. Click on the links below to learn about each one.

 

Earnings Per Share

Earnings Ratio and

Dividend Yield

 

Conclusion

A good return for shareholders isn’t always an indication that a firm is doing well or is likely to do well in the future. This is because a good return for shareholders may be against the firm’s interests. Instead you should look at shareholder ratios and other ratios to get a full picture of how a firm is performing.

 

 

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