Assignment no.

Name: Umar Mukhtar

Registration no: L1f17bsaf0058

Submitted to: Sir Abid Noor

Topic: Shareholder Equity Analysis

 Shareholder Equity Analysis

Definition:
Shareholders’ equity essentially represents the
amount of a business's holdings that weren't purchased using
debt (loans). Whether you’re investing and buying stock in a
company. Shareholders equity is the amount that shows how
the company has been financed with the help of common
shares and preferred shares. Shareholders equity is also called
Share Capital, Stockholder’s Equity.

Formula:
The shareholders Equity can be calculated with the help of the
following formulas:
Shareholders Equity = Total Assets – Total Liabilities
Components:
• Preferred shares
Preference shares, more commonly referred to as preferred stock, are
shares of a company’s stock with dividends that are paid out to
shareholders before common stock dividends are issued. If the
company enters bankruptcy, preferred stockholders are entitled to be
paid from company assets before common stockholders. Most
preference shares have a fixed dividend, while common stocks
generally do not.

•Treasury shares:
Otherwise referred to as treasury stock, these refer to shares in an
entity which have been repurchased by the entity. The repurchase of
shares reduces shareholders’ equity by the amount of the acquisition
cost and also reduces the number of shares outstanding.

• Retained earnings:
Retained earnings are the profits that a company has earned to date,
less any dividends or other distributions paid to investors. This amount
is adjusted whenever there is an entry to the accounting records that
impacts a revenue or expense account. A large retained earnings
balance implies a financially healthy organization.

•Capital contributed by owners (or common stock, or

issued capital):
This is the amount of capital that was contributed to the entity by its
owners. For each class of common shares issued, the entity must
disclose the number of shares authorized, issued, and outstanding.
Major shareholder equity ratio:
 Earnings per share (E.P.S)
 Price /Earnings ratio
 Dividend per share
 Dividend yield
 Dividend cover
 Price / book value ratio
 Dividend payout ratio
 Book value per share

EPS ratio (Earning per Share):

The earnings per share ratio calculates the amount of money each
ordinary share is making Earning per Share. People that have ordinary
shares are entitled to vote at the firm's meetings, they will also be paid
money (dividends) from the company's profits after the company has
paid people with preference share.
Dividend Yield:
The Dividend Yield compares the dividends that shareholders are
receiving against the market price of ordinary shares. The dividend
yield formula is as follows:
Dividend Yield = Dividend per share /Market value per share

Price Earnings ratio:

The Earnings ratio which is also known as the PE ratio compares the
firm's share price against how much money each share is making. The
P/E ratio shows the expectations of the market and is the price you
must pay per unit of current earnings.

Dividends per share:

Dividend per share is a measure of the dividend pay-out per share of a
company’s common stock. The measure is used to estimate the number
of dividends that an income investor might expect to receive if he or
she were to buy a company's common stock. This measures the size of
the dividends that the company actually pays to its shareholders. It is
calculated using the following formula:

Dividend coverage ratio:

Dividend Coverage Ratio states the number of times an organization is
capable of paying dividends to shareholders from the profits earned
during an accounting period.

Formula: