It is very common in the examination to be given information about a company and to be asked to comment on the performance. It is clearly important in practice to have measures in order to determine whether or not the company is performing well.
It is important to measure both financial and non-financial performance, but in this chapter we will consider only financial performance. You will be given extracts from the company’s accounts for several years and be expected to analyse and interpret this information.
Hi Sir,
Thanks a lot for the informative lecture.
Question pls, how did we get the market capitalization amount? and what is the use of it in solving the question?
Also for the Dividends per share, I divided the dividends payable by the number of the shares, I get the a number that I have to multiply by 100 to reach the answer in the notes, why is it?
Thanks in advance
Malak
Market capitalisation = number pf shares x price per share.
P/E ratio = Price per share/earnings per share =
For year 1, EPS = = 5100/9000 = 0.5666, so price per share P/E x EPS = 17 x 0.5666 = 9.63
Market capitalisation = 9.63 x 9,000,000 = 86.67m
Market capitalisation has grown from 86.67m to 143,4m. Some of this will because of the injection of more share capital, some from market and economic sentiment, some from the company increasing its profits. Whatever reason, the company seems to be doing well. Individual share holders would probably be more interested in the share price growth of 24% over the four years. That might be good or bad as it depends on inflation and what other investments might be doing
Dividends per share (and earnings per share) are normally given in the smaller denomination currency, so p instead of £ and c instead of $. So if eps – 0.5$ that will be 50c.
Hello! If I may ask about Dec 09 question BEC and calculation in respect of budgeted costs.
Why for budgeted costs in respect of Tuition materials, Catering etc it is actual student count of 7,200 used instead of budgeted student count 6,900? Perhaps, there is a reason that I just can’t remember now.. Thanks! Sintija
Regarding variable costs budget is flexed, that’s why 7200/8000 adjustment is applied to variable costs. Management requirement was to have actual vs budget income statement on comparable basis.
What I can not understand, is why the revenue part of the budget is not flexed like variable costs? Revenues are based on budgeted number of students 6900, while variable costs are calculated on the actual basis of 7200 students.
Any idea?
thanks for the lecture
You are welcome.
Wonderful Lecture. Thank you!
Great lecture. Thanks! I did notice the P/E ratio was calculated as price per share × EPS. Thought it’s Price per share/ EPS. Shouldn’t it be consistent?
We are working backwards. The P/E ratio was supplied and we are working out the share price from that and the earnings
Crystal clear. Simply a superb standard of teaching. Thank you!
Thanks. Glad to know it was useful.
really good lecture, thank you
Nice lecture. Very educative and helpful. Thank you.
Thank you for the comment 🙂
Thank you..! Great lecture 🙂
This has increased my knowledge on financial performance measurement considering my understanding previously. Excellent
Thank you for the comment 🙂
this an excellent lecture
Brilliant and swift analysis of the practice question. Ratios to play with depends on what the question/scenario says.