Chapter # 16 is all about equity and shares? Should we consider practical issues of debt as well for F9 exam? If yes, please list some practical issues of Debt.
The numbers of people buying and selling. The market value changes in response to the people wanting to buy and to sell, and the speed at which it changes depends on how many people are buying and selling.
Hi John, We are taking PE ratio of similar quoted companies, because we are considering to take over an unquoted company. What if the company under consideration is itself a quoted company, can we then, take the PE ratio of the company itself?
Certainly not! (and neither are acquisitions of unquoted companies always done based on PE ratios).
If you are acquiring another company you will look at all different methods to get a basis for deciding how much to offer. If they are quoted then you obviously will not bother offering less than market value because the current shareholders will not be prepared to sell at less than market value.
Sir If we have to calculate the Market Value and the dividend in ABOUT TO PAID it means that we have to find Market Value Cum-Div And if the dividend in just paid then the Market Value that we calculate should be Ex-Div? And in finding the Required Rate Of Return we Always Subtract Current Dividend from the Market Value Cum-Div(Because we always deal with Ex-Div in Required Return)?
The term can mean several things, depending on the context. However, without seeing the relevant page in the BPP book and given that it is F9, it will simply be another term for the asset value (i.e. the value of the companies assets divided by the number of shares). (Sorry for a delay in answering, but we cannot always see all the comments – it is better to ask questions in the relevant Ask the ACCA Tutor Forum – these questions are always answered very quickly)
Sir, I have a problem in Dividend cover, in BPP book it is mentioned that dividend cover is the number of times the actual dividend could be paid out of current profits but if we look at the formula it is Earnings per share /dividends per share..?? this does not explain the no. of times the dividend could be paid out of current profits, rather it should have been Dividends/ Earnings..??
Divi per share (DPS) / Mkt value per share (MV) = 0.023 So……MV / DPS = 1 / 0.023 = 43.478
MV / EPS = 21.1, so MV = EPS x 21.1
So replacing MV in the equation in my second line gives: (EPS x 21.1) / DPS = 43.478 Dividing by 21.1 gives: EPS / DPS = 43.478 / 21.1 = 2.06 (= dividend cover)
Business Finance looked so simple when you taught it but working these questions in the kit is a killer! I had fun working the Working Capital questions the Investment appraisal and cost of capital.
I cannot remember which lectures, but they are mentioned several times in different lectures, because the PE ratio in particular is so fundamental.
The market capitalisation is the total market value of the company’s shares (although I don’t know what you mean by discuss – there is nothing to discuss in that it is the market value of the company, by definition.)
The PE ratio is terribly important for the exam and again is covered completely in my lectures (and discussed 馃檪 )
salman7 says
Dear sir,
Chapter # 16 is all about equity and shares? Should we consider practical issues of debt as well for F9 exam? If yes, please list some practical issues of Debt.
Thanks as always,
John Moffat says
Everything needed is dealt with in my lectures 馃檪
Laiq Hussain says
Dear sir,
What does ‘the volume of business in the share” means as quoted below from the notes of Chap # 16. Any example?
“In practice, market values do not change instantly on changes in expectations – but the speed depends on the volume of business in the share.”
Thanks,
John Moffat says
The numbers of people buying and selling. The market value changes in response to the people wanting to buy and to sell, and the speed at which it changes depends on how many people are buying and selling.
Mahrukh says
Hi John,
We are taking PE ratio of similar quoted companies, because we are considering to take over an unquoted company. What if the company under consideration is itself a quoted company, can we then, take the PE ratio of the company itself?
John Moffat says
We are using the PE to be able to place a value on the shares. If it is a quoted company then the shares will already have a market value.
Mahrukh says
So the acquisitions are always done on the market value, in case of quoted companies?
John Moffat says
Certainly not! (and neither are acquisitions of unquoted companies always done based on PE ratios).
If you are acquiring another company you will look at all different methods to get a basis for deciding how much to offer. If they are quoted then you obviously will not bother offering less than market value because the current shareholders will not be prepared to sell at less than market value.
Mahrukh says
That means market value gives the minimum value for a company.
Thanks for the explanation John 馃檪
John Moffat says
Correct 馃檪
osmanuaepak@yahoo.com says
Sir If we have to calculate the Market Value and the dividend in ABOUT TO PAID it means that we have to find Market Value Cum-Div And if the dividend in just paid then the Market Value that we calculate should be Ex-Div? And in finding the Required Rate Of Return we Always Subtract Current Dividend from the Market Value Cum-Div(Because we always deal with Ex-Div in Required Return)?
John Moffat says
Yes, to both questions 馃檪
(and, as I do say in the lectures, if you are not told then you always assume market values are ex div in the exam)
Erica says
Sir, is Chapter 15 & 16 of F9 included in the syllabus of FFM?
John Moffat says
No, not FFM 馃檪
smartabrar2003 says
Sir, there is a term “Asset backing” in BPP book which is used in Valuation, can u please elaborate this term what does it mean?
John Moffat says
The term can mean several things, depending on the context. However, without seeing the relevant page in the BPP book and given that it is F9, it will simply be another term for the asset value (i.e. the value of the companies assets divided by the number of shares).
(Sorry for a delay in answering, but we cannot always see all the comments – it is better to ask questions in the relevant Ask the ACCA Tutor Forum – these questions are always answered very quickly)
Muhammad says
#smartabrar asset backing means… how much the company has asset .. its showing the strength of company asset
smartabrar2003 says
Sir, I have a problem in Dividend cover, in BPP book it is mentioned that dividend cover is the number of times the actual dividend could be paid out of current profits but if we look at the formula it is Earnings per share /dividends per share..?? this does not explain the no. of times the dividend could be paid out of current profits, rather it should have been Dividends/ Earnings..??
John Moffat says
No – what BPP says is correct.
Suppose the earnings per share is 50c and the dividend per share is 10c.
Then you could pay the dividend 5 times out of the current earnings. The dividend cover would be 5.
smartabrar2003 says
got it sir,, thanks
John Moffat says
Great 馃檪
kien says
Sir, you are really great teacher . Your lectures are valuable for me,
Tks you so much.
charis2475 says
U’re d best John ….u lecture is the simplest version of f9 ..God bless u
latoyah says
Hi John,
i’m not sure what i am doing wrong – how do you get a dividend cover of 2.06 with a P/E of 21.1 and a Dividend yeild of 2.3%?
John Moffat says
Divi per share (DPS) / Mkt value per share (MV) = 0.023
So……MV / DPS = 1 / 0.023 = 43.478
MV / EPS = 21.1, so MV = EPS x 21.1
So replacing MV in the equation in my second line gives: (EPS x 21.1) / DPS = 43.478
Dividing by 21.1 gives: EPS / DPS = 43.478 / 21.1 = 2.06 (= dividend cover)
Hope that helps 馃檪
latoyah says
Thank you so much!
latoyah says
Business Finance looked so simple when you taught it but working these questions in the kit is a killer! I had fun working the Working Capital questions the Investment appraisal and cost of capital.
zee90 says
Sir in which lecture or topic you have discussed about these topics
market capitalisation (equity market value?
price/earnings ratio method using the business sector average price/earnings ratio
i was doing past paper Q4 of december2012 where i saw those
John Moffat says
I cannot remember which lectures, but they are mentioned several times in different lectures, because the PE ratio in particular is so fundamental.
The market capitalisation is the total market value of the company’s shares (although I don’t know what you mean by discuss – there is nothing to discuss in that it is the market value of the company, by definition.)
The PE ratio is terribly important for the exam and again is covered completely in my lectures (and discussed 馃檪 )
zee90 says
thank you Sir
renelsa says
John teaches really well, thanks so much
Kristi says
Thank you John, you are really good teacher and entertaining in the same time as well.. “nobody’s face moves, its worrying me” 馃榾
aelsewy says
Dear sir,
i found topic in my kaplan book called Efficient market hypothesis (EMH) can you tell me what is this?
theodora118 says
he is the best , he makes everything simple and easy to understand. thank u john,
osmanaslam says
Sir John you are Gods gift to all of us Acca students.
abiw2012 says
John indeed stands for greatness.kudos, John and team
abiw2012 says
great man, great lecture God bless u John
faizan1185 says
sir there is problem in this lecture …. not playing despite of trying several times
Saad Bin Aziz says
John simply has no comparison:-)