Financial Glossary

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1. Book Value / Share Cons. CEPS Cons. EPS Cons. FCF / Share Cons. Fully Diluted EPS Current assets Current liabilities Current ratio D/E ratio Dividend Yield DPS Earnings Yield FDEPS Long-term debt Net profit Margin Net fixed assets Number of shares Networth Operating Profit Operating Profit Margin PBV PCF PER ROA ROE ROIC RONW Sales/Share Short-term debt Total assets Total liabilities  

Book Value / Share:

Net Worth / Number of Shares

The net worth or the shareholders' equity of the company is divided by the number of equity shares outstanding, to arrive at the book value per share.

Cons. CEPS:

(Consolidated Earnings + Depreciation) / Number of Shares

Cash Earnings Per Share is the actual cash earned by the company on a per share basis. Hence depreciation, which is a non -cash expenditure, is added back to PAT to arrive at the true cash earnings of the company.

Cons. EPS:

Consolidated Earnings / Number of Shares

This is calculated by dividing the sum of net profit after tax of the company & its subsidiaries (less any dividends on preference shares that the company may have paid and Minority Interest) for a given year or period by the number of equity shares outstanding at the end of the year. This ratio shows the profits earned by the company as a group for every share issued.

Consolidated FCF / Share:

(Consolidated Earnings + Depreciation-Capital Expenditure) / Number of Shares

Free Cash Flow (FCF) is the cash earned by the company that can be actually distributed to the shareholders. An in-depth methodology would be to adjust a company's increase or decrease in net working capital (current assets less current liabilities) to the above figure. Free cash flow increases if the company manages to improve efficiency and consequently reduce the required working capital. This ratio implies the amount of free cash available per share.

Cons. Fully Diluted EPS:

Consolidated Earnings / Diluted Number of Shares

This is calculated by dividing the sum of net profit after tax of the company & its subsidiaries (less any dividends on preference shares that the company may have paid and Minority Interest) for a given year or period by the number of equity shares outstanding and the convertible shares/debenture at the end of the year. This ratio shows the amount earned (earnings) by the group for every share issued.

Current assets:

Inventory + Cash + Sundry Debtors + Bills Receivable + Loans and Advances + Interest Accrued on Loans and Advances + Deferred Tax Assets + Investments in Marketable Securities

Current liabilities:

Current liabilities are the liabilities, which have to be paid within a period of one year. It consists of creditors, bills payable and provisions for payment of dividends, interest and taxes.

Current ratio:

Current Assets / Current Liabilities

The ratio signifies the short-term liquidity of the company. The higher the ratio, stronger is the short term liquidity position of the company.

Debt to Equity ratio (D/E ratio):

Long Term Debt+ Short term Debt/ Net Worth

It is the long-term debt of the company divided by its net worth or the shareholder's equity. Debt to equity ratio varies considerably depending on the business of the company and the attitude of the management towards debt. Companies in heavy industries such as fertilisers and steel, which require large investments in property, plant and machinery, or technology, may have higher debt to equity ratio.

Dividend yield:

(Dividend Per Share / Market Price Per Share)*100

A financial ratio that indicates how much a company pays out in dividends each year relative to its share price.

Dividend per share (DPS):

Dividend Declared / Number of shares

This is the amount of dividend declared by the company calculated on a rupees-per-share basis.

Earnings yield:

(Earnings Per Share / Market Price Per Share)*100

The earnings yield is the ratio of a company's last twelve months (LTM) of earnings per share (EPS) to its stock price.

Fully diluted earnings per share (FDEPS):

Earnings / Diluted Number of Shares

(Fully Diluted Earnings per share) The term signifies the amount earned per share (Outstanding + Convertible)

Long-term debt:

Long Term Debts are debts repayable after one year. It is the amount of money that the company has borrowed and which it has to repay after a period of more than one year. Many companies do not disclose this data in their Annual Reports and hence it is an estimation.

Net profit margin (NPM):

(Profit after tax / Net Sales)*100

Net fixed assets:

Gross Fixed Assets - Accumulated Depreciation

It is the amount of fixed assets (like plant and machinery) owned by the company less the depreciation expenses that have been charged to the profit and loss account over the years. Capital work-in-progress is also included in net fixed assets.

Number of shares

It is the number of equity shares that have been issued by the company as reported in the annual report. Even if the number of shares paid for is less than the number of shares issued, the number of shares issued has been taken for all calculations.

Networth:

Equity Share Capital + Reserves + Preference Capital - Miscellaneous Expenditure

It is the total assets of the company less its current liabilities, long term debt, and miscellaneous expenses. Net worth is also known as shareholder's equity or shareholders funds. Net worth includes equity share capital and all reserves (including revaluation reserve) less expenses not written off. It is that part of the company which belongs to the shareholders.

This money has to be invested by the borrower of the property prior to the release of the loan amount in case of construction of a house. In case it is for purchase of a house, then the loan amount will be released on the day of registration of the property and the margin money has to be invested by the borrower prior to the release. In case of purchase of flats also, the release will be made only on investment of the margin money by the borrower.

Operating Profit:

Net sales - Operating expenses

Operating profits can also be calculated as Profit before Tax + Depreciation + Interest - Other Income

Operating Profit Margin:

Operating Profit / Net Sales * 100

This ratio shows the operating efficiency of the company. Higher the ratio, higher is the efficiency.

Price to book value ratio (PBV):

Market Price / Book Value

The price to book value ratio, or PBV ratio, compares the market and book value of the company.

Price to cash flow ratio (PCF):

Market Price / Cash Flow

The current market price, divided by the cash flow per share gives the price to cash flow ratio.

Price earnings ratio (PER):

Market Price / Earnings

The current market price, divided by the earnings per share gives the price to earnings ratio. It signifies the number of times of earnings the market is willing to pay to be part of the company's fortunes.

Return on assets (ROA):

(PAT / Total Assets)*100

It is the profit after tax divided by the total assets as at the end of that year/period. It measures how profitably the assets of the company have been utilised. Companies with high asset base in capital-intensive industry such as fertilisers and steel tend to have a lower Return on Assets than companies selling branded products such as toothpaste and soaps, which may have a lower asset base.

Return on equity (ROE):

(Net Income / Total Equity)*100

The return on equity ratio or ROE is a profitability ratio that measures the ability of a firm to generate profits from its shareholders investments in the company.

ROIC:

(PAT + interest) / (Net Worth + Interest Bearing Debt - Idle Cash in hand) * 100

This ratio shows the returns that the company earns on the capital actually invested in the business.

Return on networth (RONW):

(Profit after tax / Net Worth)*100

The ratio signifies the return earned by the company on the Net Worth.

Short-term debt:

Short Term Debts are the debts repayable within one year. It is the amount of money that the company has borrowed and which it has to repay within a period of one year. Many companies do not disclose this data in their Annual Reports and hence it is an estimation.

Total assets:

Net Fixed Assets + Investments + Current Assets

Total liabilities:

Net Worth + Long Term Debt + Short Term Debt + Current Liabilities + Deferred Tax Liabilities