Financial ratio's - Investment

5 important questions on Financial ratio's - Investment

There are four ratios that help shareholders assess the returns on their investment. What are those four ratios?

  1. Dividend payout ratio
  2. Dividend yield ratio
  3. Earnings per share
  4. Price/earnings ratio

What does the dividend payout ratio measure?

It measures the proportion of earnings that is paid out to share holders in the form of dividends

What is the formula for the dividend payout ratio measure?

Dividend payout ratio = Dividends announced for the year / earnings for the year available for dividends x 100
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What is the formula for the dividend yield ratio?

Dividend yield = Dividend per share / market value per share x 100

What does the earnings per share ratio relate to?

The earnings generated by the business and available to shareholders, during a period, to the number of shares in issue

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