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ROE = Net Profit After Tax & Minority Interest / Average Shareholders Funds ROE is a popular measure of how efficient a company is using its funds to generate income for its shareholders. Unlike Return on Capital Employed, it does not take into account a company’s gearing position. For example, a company can increase its [...]

Capital Employed is also sometimes referred to as Funds Employed. It is basically the total of a company’s Business Assets (excluding its Cash holdings) less its Trade-related Liabilities. Capital Employed = Net Assets – Cash + Borrowings

Dividend Yield = Gross Dividend per Share / Share Price Dividends are usually periodic cash payments to shareholders out of a company’s earnings or earnings reserve. In corporate finance theory, the total returns you get from investing in a share = Income Return + Capital Return where Income Return is your dividend component, while Capital [...]

PEG Ratio stands for Price-Earnings to Growth Ratio. It is a ratio used to determine a stock’s value while taking into account earnings growth. The calculation is as follows: PEG Ratio = PER / Annual EPS Growth PEG is a widely used indicator of a stock’s potential value. It is favored by many over the [...]

EBIT Multiple = Enterprise Value / EBIT (EBIT stands for Earnings Before Interest and Tax. It is the profits of the company before the impact of interest income, interest expense and tax expense. As such it is an indicator of the earnings of a business excluding the impact of its cash holdings and borrowings). Calculation of [...]

PE Ratio = Share Price / Earnings Per Share Where Earnings per share (EPS) is a company’s Net Profit After Tax and Outside Equity Interest, divided by the Weighted Average Equivalent Number of Shares issued. For example if a company makes a net profit after tax of RM10 million and it has 100 million issued [...]

This ratio is useful as a rule-of-thumb. For example if the corporate tax rate is 26%, then Tax Expense divided by Profit Before Tax should be around that range. Differences usually arise because of either: 1. Timing issues (eg. expenses being tax deductible in a different accounting period) 2. Permanent differences (eg. expenses not being [...]

EBIT Margin = EBIT / Revenue It is a measure of the company’s earnings margin before the impact of tax and financing.

Interest cover is a company’s EBIT divided by its Net Interest Expense. For example take a company has EBIT of RM100 million per year. Let’s say its Interest Income is RM3 million while Interest Expense is RM13 million. That means its Net Interest Expense is RM10 million. Therefore Interest Cover is 10 times. This is [...]

Gearing = Net Borrowings / Net Assets