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Shareholder Ratios

Introduction
People that have bought shares in a firm (or wondering whether to buy shares) will be interested in how much money (return) the firm can generate for them. Shareholders receive a return from shares in two ways. The first is if or when the shares go up in value, so that if the shareholder decides to sell their shares, they will get back more money than they paid for the shares. The second return is if or when the firm decide to give the shareholders some of the profit money it has made; this type of return is known as a dividend.

There are three ratios that look at the return shareholders are receiving.

• Earnings Per Share
• Earnings Ratio and
• Dividend Yield

 

A good return for shareholders isn’t always an indication that a firm is doing well or is likely to do well in the future. This is because a good return for shareholders may be against the firm’s interests. Instead you should look at shareholder ratios and other ratios.

 

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