Chapter 13, Problem P13.40APGA

To determine

1)

Introduction:

Classes of shares:

• Shares provide partial ownership or a “share” of a corporation. There are two primary classes of shares – Equity Shares and Preference Shares.

• Equity shares are the class of shares which carry voting rights and equity share holders are the true owners of the company as in the event of dissolution, equity shareholders get last preference in clearing the amounts invested and there is no guarantee of profits will be debited by dividend on an annual basis.

• Preference shares are the class of shares which do not carry voting rights and in the event of dissolution, preference shareholders get first preference in clearing the amounts invested and there is usually guarantee of profits will be debited by dividend on an annual basis. Convertible Preference shares are preference shares that carry the option to be converted into equity shares after certain duration.

Ratio Analysis

• Ratio analysis is a study of several key metrics of a company based on the data presented in its’ financial statements with an objective to evaluate the financial health of a company.

• It is essential for investors, stakeholders, government bodies etc. to evaluate the key metrics of an entity in order to ensure that the company fulfills the going concern principle and displays financial stability.

The key metrics mentioned above include the following:

• Earnings Per share – A measure of the Earnings per share of equity shares or common stock calculated to estimate the income earned per unit of share owned.

• It seeks to measure the multiple between the net income for the year less preferred dividend divided by the number of shares outstanding. The greater the Earnings per share, the higher is the market price and investor expectations from the stock.

$\text{Earnings Per Share = Net Income less Preferred Dividends / Number of equity shares outstanding}$

To Calculate:

Earnings per share for 2016

To determine

2)

Introduction:

Classes of shares:

• Shares provide partial ownership or a “share” of a corporation. There are two primary classes of shares – Equity Shares and Preference Shares.

• Equity shares are the class of shares which carry voting rights and equity share holders are the true owners of the company as in the event of dissolution, equity shareholders get last preference in clearing the amounts invested and there is no guarantee of profits will be debited by dividend on an annual basis.

• Preference shares are the class of shares which do not carry voting rights and in the event of dissolution, preference shareholders get first preference in clearing the amounts invested and there is usually guarantee of profits will be debited by dividend on an annual basis.Convertible Preference shares are preference shares that carry the option to be converted into equity shares after certain duration.

Ratio Analysis

• Ratio analysis is a study of several key metrics of a company based on the data presented in its’ financial statements with an objective to evaluate the financial health of a company.

• It is essential for investors, stakeholders, government bodies etc. to evaluate the key metrics of an entity in order to ensure that the company fulfills the going concern principle and displays financial stability.

The key metrics mentioned above include the following:

• Price Earnings Ratio – A comparative measure of the Price of equity shares or common stock as compared to the earnings per share.

• It seeks to measure the multiple between the price and earnings per share. The greater the P/E ratio, the higher is the market price and investor expectations from the stock.

$\text{Price Earnings Ratio = Net Price Per Share / Earnings Per Share}$

To Calculate:

Price Earnings Ratio for 2016

To determine

3)

Introduction:

Classes of shares:

• Shares provide partial ownership or a “share” of a corporation. There are two primary classes of shares – Equity Shares and Preference Shares.

• Equity shares are the class of shares which carry voting rights and equity share holders are the true owners of the company as in the event of dissolution, equity shareholders get last preference in clearing the amounts invested and there is no guarantee of profits will be debited by dividend on an annual basis.

• Preference shares are the class of shares which do not carry voting rights and in the event of dissolution, preference shareholders get first preference in clearing the amounts invested and there is usually guarantee of profits will be debited by dividend on an annual basis.Convertible Preference shares are preference shares that carry the option to be converted into equity shares after certain duration.

Ratio Analysis

• Ratio analysis is a study of several key metrics of a company based on the data presented in its’ financial statements with an objective to evaluate the financial health of a company.

• It is essential for investors, stakeholders, government bodies etc. to evaluate the key metrics of an entity in order to ensure that the company fulfills the going concern principle and displays financial stability.

The key metrics mentioned above include the following:

• Return on Shareholders’ Equity – A measure of the total earnings of the equity share holders in proportion to the share capital introduced by them.

• It seeks to measure the proportion of the total earnings in relation to the investment made and is an effective way to evaluate how profitable the investment in the company is.

$\begin{array}{l}\text{Return on Shareholders' Equity = Net Income less preferred Dividends }\\ \text{ / Shareholders' Equity x 100}\\ \\ \text{Shareholders' Equity = Closing balance of Stockholders Equity }\\ \text{ - Par Value of Preferred Capital}\end{array}$

To Calculate:

Return on Common Shareholders Equity for 2016