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Definitions of Terms
- Short- and long-term debt at year-end, including capital lease obligations, plus total shareholders' equity. Basically, the sum of the value of the shareholders' stake in the business plus amounts the company has borrowed.
- Cash flow per share
- Cash flow from operations divided by average common shares outstanding. Cash flow from operations is the income for the year before extraordinary items plus non-cash expenses (such as asset write-downs). It shows how much money from operations is available for such things as new equipment, debt repayment and dividends.
- Dividend yield
- Annual dividends per common share divided by closing price as of the company's balance sheet date, all multiplied by 100. Particularly in cases of income trusts or companies with stable share prices, investors often compare the dividend yield with returns on bonds, GICs or other fixed-income investments. Recently, the average dividend yield of companies in the S&P/TSX Composite Index was about 1.75%.
- Debt-to-equity ratio
- Short- and long-term interest-bearing debt (such as bonds outstanding and capital lease obligations) at year-end divided by shareholders' equity. Indicates how much the company is relying on debt, rather than its own funds.
- Earnings per share
- Net earnings (or income) for the year before extraordinary items, less preferred-share dividends, divided by average common shares outstanding. Extraordinary items are any gains, losses and provisions for losses during the year that did not arise from normal business and are not expected to recur.
- Market capitalization
- Closing price of company's common shares as of the balance sheet date multiplied by the number of shares outstanding. Provides a snapshot of the stock market's valuation of the company.
- Price-to-book-value-per-share ratio
- Closing share price as of the company's balance sheet date divided by book value per share. Book value per share is common shareholders' equity divided by common shares outstanding at end of an indicated fiscal period. A ratio often used by value investors to evaluate a company's price relative to its net worth on its balance sheet.
- Price-to-cash-flow-per-share ratio
- Closing share price as of the company's balance sheet date divided by cash flow per share. Helps to determine the quality of earnings when compared with the price-to-earnings ratio.
- Price-to-earnings ratio
- Closing share price as of the company's balance sheet date, divided by earnings per share. A ratio traditionally used by value investors to gauge if a company's share price is justified in relation to its profits. Many value investors are uncomfortable with a P/E higher than 20. The average P/E for the S&P/TSX Composite Index has recently been around 17.24.
- Price-to-sales-per-share ratio
- Closing share price as of the company's balance sheet date divided by sales per share. Often used to evaluate high-tech and other companies that may be growing rapidly, but are not yet earning profits.
- Net income for the year after taxes, excluding extraordinary gains or losses.
- Profit % change
- Percentage change in earnings before extraordinary items during the latest fiscal year.
- Profit growth or decline over five and 10 years
- Compound rate of change in profit between current fiscal year and the annual profit five and 10 years ago.
- Return on capital
- Net income (or profit) before extraordinary items, interest expense and income taxes, divided by average capital. Shows how effectively a company is employing its capital (shareholders' equity and borrowings) to generate profits. Still widely used to evaluate financial institutions, but of limited use in other sectors.
- Return on common equity
- Net income (or profit) before extraordinary items, less dividends paid on preferred shares, divided by average common shareholders' equity. Shows the rate of return on investment for the company's common shareholders. The simple average of the annual returns over five years reduces the impact of unusual year-to-year fluctuations.
- Total revenue from operations, less sales and excise taxes, plus income from investments and any other pretax income and before losses on foreign exchange.
- Revenue % change
- Percentage change in total revenue during the latest fiscal year.
- Revenue growth or decline over five and 10 years
- Compound rate of change in revenue between the total for the latest fiscal year and the totals five and 10 years ago.
- Share price % change
- Percentage change in closing market price plus dividends paid during the latest fiscal year.
- Share price gain or decline over five and 10 years
- Compound rate of change in current closing market price at the end of the latest fiscal period plus dividends paid over five and 10 years, versus the closing market prices five and 10 years ago.
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