Investment Ratio Analysis & Example

List of investment ratios and formulas:

1) Dividend cover = Profit after tax / dividends
2) Dividend yield = ( Dividend per share/ Market price per share ) * 100 %
3) Earnings per share (EPS) = Profit available to equity shareholders / Number of equity shares
4) Price earnings ratio (P/E) = Market price per share / Earnings per share
5) Price to sales ratio = Market price per share / Sales per share
6) Price earnings growth (PEG) ratio = Price per earnings / Annual EPS growth
7) Price to book value (PBV) = Market price per share / Balance sheet price per share
8) Payout Ratio = Dividend per share / EPS

Examples:

1) Camry Ltd made a net profit of $80,000 that is available to ordinary shareholders, and the dividend declared is $20,000, then:
   Dividend cover =  80,000 / 20,000 = 4 times

2) An investor bought a share at $6.00 and he received a dividend of $0.30 on it, then:
    Dividend yield = (0.30 / 6.00) * 100 % =  5 %

3) Company ABC has an annual earning of $140,000 dollars. Total dividends of $70,000 are to be paid out, and the company has 350,000 outstanding shares.
Solution:
Earnings per share (EPS) = $140,000 / 350,000 = $0.40
Dividend per share = 70,000 / 350,000 = $0.20
The dividend payout ratio = 0.20 / 0.40 = 50%

4) Sports Ltd has ordinary share capital of 200,000 shares at $1 each. It made a net profit of $400,000 that is available to the ordinary shareholders. The market price of a share is $6.00.
Then:
EPS = $400,000 / 200,000 = $2 per share
P/E ratio = $6 / $2 = 3

* Next: Liquidity Ratio Analysis & Example
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Kelvin Wong Loke Yuen is an experienced writer with a strong background in finance, specializing in the creation of informative and engaging content on topics such as investment strategies, financial ratio analysis, and more. With years of experience in both financial writing and education, Kelvin is adept at translating complex financial concepts into clear, accessible language for a wide range of audiences. Follow him on: LinkedIn.

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