Investor ratios
Examples include earnings per share, price-to-earnings ratio and dividend yield. Each measures a different relationship and may use different dates or earnings bases. Interpretation should consider business prospects, risk, accounting choices and comparability; a high or low result is not automatically favourable. Use the formula supplied or expected in the relevant exam.
Worked example
A share costs $12, annual earnings per share are $1.50 and the annual dividend is $0.48. P/E is 12 / 1.50 = 8 times and dividend yield is 0.48 / 12 = 4%.
Common mistake
Comparing ratios calculated using inconsistent periods, or presenting dividend yield as the same thing as earnings yield.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |