6.7.
Price Earnings Ratio
Price Earnings Ratio
(Earnings per share 
A
higher price earnings ratio as compared to that of other companies shows higher
confidence the company enjoys with the public. This ratio is also used by the
investors to know whether the shares of the company are undervalued or
overvalued. Based on this fact they would decide to purchase the shares at the
particular price or not. For instance, suppose the market price of the shares
of the Company A is Rs. 80 when it earnings per share is Rs. 10. (The price
earnings ratio of the company is 8.) The price earnings ratio of other
companies is 9. Based on the general price earnings ratio, the market price of
the shares of Company A should be (Rs. 10
) Rs. 90. The shares of Company A are
undervalued since they are quoted at Rs. 80.
6.8.
Dividend Yield Ratio
Dividend Yield Ratio 
Yield
is the actual return for the shareholders on the investment. The dividend is
declared on the face value of shares. Thus 20% dividend declared on a share of
the face value of Rs. 10 would fetch Rs. 2 as dividend. But, if the shareholder
has acquired the share from the market for Rs. 40, the actual yield will be
Dividend Yield Ratio 
6.9.
Earnings Yield Ratio
Earnings Yield Ratio 
This
ratio measures the yield earned by the company per share.
7.0
Summary
The
Financial statements and ratios furnished in this paper are normally used in
the accounting section are for validation, verification and for improvement of
the company. The real success of any management lies with proper vision,
mission towards the up-gradation of our society.
Reference:
1)
Prof. C. Jeevanadam, Sardar
Vallabhbhai Institute of Textile Management, Coimbatore, Notes on Financial Statements,
Short Term Programme on Financial Management at Bannari Amman Institute of
Technology, Sathyamangalam on 05.01.2005.
2)
Principles of Accounting, Dr. Vinayagam,
P. C. Mani, K. L. Nagarajan, Kalyani Publications, New Delhi, 2002.
3)
Financial Management, Dr. R. S. Kulsherestha,
Kalyani Publications, New Delhi,2002
4)
Dr. B. K. Behra, Class notes on
Costing and Management,IIT-Delhi,2003
About
the Authors:
The authors are associated with Department of Textile
Technology, Bannari Amman Institute of Technology and Department of Textile
Technology, PSG College of Technology, Tamilnadu, respectively.
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