Business valuation and ratios — OpenTuition Forums

VVavneet5y ago

Hi I am really striggling in to understand some concepts like, PE ratio and learning yield ratio etc. the main formula is ok to understand but when in book they talk about profit before tax and after tax and preference dividend etc, I am really struggling because I think I am not sure about thebasics where to use profit after tax etc. for this what should I study? is there anything I can read about to understand this?

John MoffatTutor5y ago#1

In respect of earnings per share, PE ratio, and earnings yield, all you really need to know if that the earnings are the amount available for the ordinary shareholders. The amount available for ordinary shareholders is the profit after interest, after tax, and after preference dividends i.e. the amount left over after everything else has been paid :-)

VVavneet5y ago#2

Thanks but what do you mean by,all you really need to know if that the earnings are the amount available for the ordinary shareholder.Could you please explain little?

John MoffatTutor5y ago#3

Maybe I misunderstood your post, but it seems as though you were happy with the formulas but that you were not clear what was means by 'earnings'. That is why I explained what was meant by the earnings.

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