Investment and Finance
The most frequently asked tax questions related to Investment and Finance
What is Earnings Per Share (EPS) as it relates to Financial Statements ?
Asked Wednesday, October 11, 2000 by an anonymous userCPA Answer:
The EPS represents the number of dollars earned on behalf of each outstanding share of common stock. Earnings available for common stockholders divided by the number of shares of common stock outstanding = EPS. EPS is an amount earned on behalf of each share outstanding. It does not represent the amount of earnings actually distributed to shareholders.
What is the Price / Earnings ( P/E ) Ratio ?
Asked Wednesday, October 11, 2000 by an anonymous userCPA Answer:
The P/E Ratio reflects the amount investors are willing to pay for each dollar of the business's earnings. The higher the P/E Ratio, the greater the investors’ confidence in the firm. The P/E ratio represents the "multiple" that the stock market places on the earnings of a company. Market price per share of common stock divided by Earnings per share of common stock = P/E Ratio.
What is a Dividend Yield as it applies to Financial Statements ?
Asked Wednesday, October 11, 2000 by an anonymous userCPA Answer:
The Dividend Yield is the relationship between cash dividends paid to shareholders and the market price per share of common stock. Dividends per share of common stock, divided by the Market price per share of common stock = Dividend Yield.
What is the Total Asset Turnover as it relates to Financial Statements?
Asked Wednesday, October 11, 2000 by an anonymous userCPA Answer:
The Total Asset Turnover indicates the efficiency with which the business uses all of its assets to generate sales. Sales, divided by Total assets = TAT.
What is the Debt Ratio as it relates to Financial Statements?
Asked Wednesday, October 11, 2000 by an anonymous userCPA Answer:
The Debt Ratio measures the proportion of total assets financed by the business' creditors. The higher the ratio, the greater the amount of other people's money being used in an attempt
to generate profits. Total Liabilities, divided by Total assets = Debt Ratio.
What is the Gross Profit Margin as it relates to Financial Statements ?
Asked Wednesday, October 11, 2000 by an anonymous userCPA Answer:
The gross profit on inventory is divided by the average profit of the inventory. Low end items may be marked up 500% while a high end is only 30%. Use the average profit across all inventory items. If the average is 10, which means for every dollar you invested, you earned $10 more in profit.
What is the Operating Profit Margin, as it relates to Financial Statements ?
Asked Wednesday, October 11, 2000 by an anonymous userCPA Answer:
The Operating Profit Margin measures the percentage of profit earned on each sales dollar before interest and taxes.
It measures only the profits earned on operations. Operating profits, divided by Sales = Operating Profit Margin.
What is the Net Profit Margin, as it relates to Financial Statements ?
Asked Wednesday, October 11, 2000 by an anonymous userCPA Answer:
The Net Profit Margin measures the percentage of each sales dollar remaining after all expenses, including taxes, have been deducted. The higher the business' net profit margin the better. "Good" net profit margins differ considerably across industries. Net profits after taxes, divided by Sales = Net Profit Margin.
What does GAAP stand for?
Asked Wednesday, October 11, 2000 by an anonymous userCPA Answer:
GAAP is the abbreviation for "generally accepted accounting principles". They are the U.S. practice and procedure guidelines used to prepare and maintain financial records and reports and statements. They are authorized by the Financial Accounting Standards Board.
Officially established accounting principles consist of FASAB Statements of Federal Financial Accounting Standards (Standards) and Interpretations. FASAB Standards and Interpretations will be periodically incorporated in a publication by the FASAB.