SHAREHOLDER VALUE BUSINESS VOCABULARY IN USE (ADVANCED)

 

BUSINESS VOCABULARY IN USE (ADVANCED) 39. SHAREHOLDER VALUE

 

A Yield Clara Freeman, from Unit 38, continues: ‘Investors look at the yield of a company’s shares – the dividend per share that it pays out in relation to the share price. For example, a company whose shares are worth €20 and that pays a dividend of €1 has a yield of 5 per cent. The dividend per share itself is calculated by dividing distributed earnings by the number of shares outstanding. B Price/earnings ratio But companies do not pay out all their earnings – profits after tax – in dividends each period. Not all earnings are distributed to shareholders – companies keep some as retained earnings. Investors want to know how well their money is working for them and one way is doing this is to look at the earnings per share (EPS). This is calculated by dividing the after-tax profit by the number of shares outstanding – the number issued and in existence. C Maximizing shareholder value Shareholders in a company obviously want to maximize their return on investment (ROI). They increasingly look at how the company is managed in terms  of shareholder value – the total amount the shares they hold are paying out in dividends – and the increase in their value during the time that they hold them, EXERCISES 39.1 Complete the table for last year for two companies, using the information in A and B opposite. 39.2 Using the information in A and B opposite, answer the questions about the two companies in the completed table above. 1. Which company paid more to its shareholders from its profit after tax last year? 2. Which company paid out higher dividends in relation to its share price? 39.3 Complete the sentences with appropriate forms of expressions from C opposite. 1. The committee directed the company’s management and financial advisers to explore a sale or merger to determine if either would _______  _______  _______. 2. The group’s bid is the latest part of the strategy formed by its chairman to re-invest the cash raised from its _______ programme.

ANSWER KEY