Financial Treatment: Profitability Analysis

Profitability is also called profitability. It is a necessary condition for the company to exist and develop continuously, and it is also the main factor that determines and affects the dividend and profit margins of investors.

Therefore, profitability is the most important analysis object for investors.

The analysis of the profitability of enterprises can be analyzed from two aspects: shareholders and companies.

It directly reflects the investment remuneration paid by shareholders' investment enterprises (called shareholders' profitability), and some indicators reflect the profitability of the company's operation, but only indirectly affect the interests of shareholders.

(1) earnings per share.

Earnings per share refer to the earnings earned by a company's common shares in one year, which is an important indicator for investors to assess the value of shares.

The formula is:

Earnings per share = (after tax profits preferred stock dividends)

The key to the calculation of EPS is the determination of the number of ordinary shares.

In general, when the number of shares in the year is not changed, the number of year-end shares should be calculated; when the issue of new shares is increased in the year, the new shares should be calculated according to the percentage of the whole year in the actual circulation period; if the stock dividends are issued in the year or when the stock is segmented, no matter what happens in a year, they should be regarded as the beginning of the period, and the number of shares that are divided into stock dividends or stock split shall be regarded as the basis of calculation; the number of shares only refers to the common shares circulating outside, and the treasury stocks that have not yet been reissued after the company's recovery is not included.

(2) P / E ratio.

P / E, also known as the ratio of earnings to earnings, the ratio of price to earnings and P/E, refers to the cost of obtaining the unit surplus.

P / E = market price per share, earnings per share.

(3) Ben Li Bi.

The ratio of profit to profit is similar to that of earnings per share, but it only takes the dividend per share instead of the earnings per share, so the capital ratio is usually higher than the P / E ratio.

B / b = market price per share, dividend per share.

(4) the rate of return on common equity.

The rate of return on common equity refers to the ROI of ordinary shareholders.

If the company does not issue preferred shares, then the rate of return on common equity is equal to the rate of return on equity or the rate of return on equity.

This ratio is naturally higher and better.

Return on common equity = (after tax net profit - preferred stock dividend) - average common stock interest

The rate of return on equity is the net profit after tax.

(5) cash yield.

Cash yield refers to the amount of cash that a shareholder can collect from company every year divided by market price, which can be used to measure the real remuneration of shareholders.

Cash yield = cash dividend per share, market price per share.

(1) gross margin.

In the commodity production industry, gross profit is the balance of sales revenue minus sales cost.

Gross margin is the ratio of gross profit to sales revenue.

Gross profit margin = gross profit sales revenue

(2) total assets return rate.

This ratio can be used to measure the effect of enterprises on the resources they possess, and can best show the performance of enterprises.

The higher the ratio, the stronger the profitability of companies using economic resources.

Total assets return ratio = pre tax interest income average total assets