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At the end of a financial period, all expense and revenue accounts are
closed to a summarizing account usually called a Profit and Loss
Account. This is the financial statement that summarizes revenues
and expenses for a specific period of time, usually a month or a year.
The Profit and Loss Accountreflects a Period of Time Month,
Quarter, Year. It shows financial the activity of a business during that
period and indicates any profit or loss earned.
Revenue is the value of goods and serviceswhich have been
delivered to customers.
Expenses costs incurred in earning these revenues.
Net Profit is the excess of Revenue over Expenses, on the Profit
and Loss Account.
Net Loss is the excess of Expenses over Revenue, on the Income
Statement.
Introduction- Ratios
The term ratio analysis refers to
the analysis of the financial
statements in conjunction with the
interpretations of financial results of
a particular period of operations,
derived with the help of 'ratio'. Ratio
analysis is used to determine the
financial soundness of a business
concern.
Dividend Yield
2 * 100
2.5
= 80%
Pg2
Book value per share compares the amount of
stockholders' equity to the number of shares
outstanding. If the market value per share is lower
than the book value per share, then the stock price
may be undervalued. Thus, this measure is a possible
indicator of the value of a company's stock; it may be
factored into a general investigation of what the
market price of a share should be, though other
factors concerning cash flows, product sales, and so
forth should also be considered. The measurement is
rarely used internally; instead, it is used by investors
who are evaluating the price of a company's stock.
If book value per share is calculated with just common stock in the
denominator, then it results in a measure of the amount that a
common shareholder would receive upon liquidation of the
company.
The formula for book value per share is to subtract preferred stock
from stockholders' equity, and divide by the average number of
shares outstanding. Be sure to use the average number of shares,
since the period-end amount may incorporate a recent stock
buyback or issuance, and will skew the results. The formula is as
follows:
Anyone using this measure should be aware of two issues, which are:
The market value per share is a forward-looking measure of what
the investment community believes a company's shares are worth;
conversely, the book value per share is an accounting measure that
is not forward-looking at all. The two measures are based upon
different information. Consequently, it is dangerous to compare the
two measures.
The book value concept tends to undervalue (sometimes to a
considerable extent) a number of assets. For example, the value of
a brand, which has been built up through many years of marketing
expenditures, may be the primary asset of a company, and yet not
appear in the book value figure at all. Similarly, the value of inhouse research and development activities could be very high, and
yet this expenditure is charged straight to expense in most cases.
These factors can yield a massive disparity between book value and
market value.