1. Some Very Basic Info on Corporations and Stocks Part IV Mr. Leavins, BCHS

2. 1. What are some of the major metrics from financial statements that one might use in analyzing a corporation’s stock? From the Balance Sheet, one might examine the net worth of the company (assets – liabilities) by examining the owners’ equity amount From the Income Statement (aka Profit & Loss Statement), one might examine Gross Income, Operating Income, and Net Income From this basic metric on the balance sheet, one can receive a quick understanding as to whether the company has a positive net worth, or not—a negative net worth perhaps indicating that the company is in financial trouble An examination of profitability can inform investors about a company’s cost structure, and its impact of the bottom line, be it ultimately net income or net loss

3. 2. Where might an investor view a company’s stock- related information? Prior the rise of the internet, most investors consulted the financial pages of their daily newspaper in order to read data about markets in general, and companies in specific But in the age of widespread use of the internet, investors may consult a wide range of websites that provide stock-related data about many publicly-traded companies Many sites provide stock-related company profiles, with many of these profiles containing a variety of metrics about that company and its stock Several examples follow:

10. 3. When analyzing a company’s stock, what are some metrics in an online profile that might be worth considering? Market Cap Earnings per Share PE Ratio Stock Price/Book Value Dividend per Share Dividend Yield 52 Week High 52 Week Low

12. 4. What is the Market Cap of a company’s stock? Market Capitalization (Market Cap) is the following metric: Current Stock Price X Total Shares of Stock Issued = Market Cap If a company has a current stock price of $20, and if there are 1,000,000 shares of stock (outstanding shares) that have been issued, then the market cap is $20,000,000 The significance of a given company’s market cap might be ascertained by comparing it to companies in the same sector (e.g. manufacturing, banking, transportation, retail, etc.)

13. 5. What is Earnings Per Share? Earnings per Share is calculated as follows Net Income / Outstanding Shares = Earnings per share Let’s say a particular company has an annual net income of $60,000,000 Let’s also say that company has 40,000,000 outstanding shares (i.e. shares of stock owned by shareholders) $60,000,000 / 40,000,000 = $1.50 per Share In short, this company earned $1.50 in net income for every share of stock owned by a shareholder. So the EPS is $1.50.

14. 6. What is the PE Ratio? The PE Ratio measures the relationship of Stock Price to Earnings per Share Let’s say the stock price (via the stock exchange) is $12 per share Let’s say the Earnings per Share (EPS) is $1.50 $12 stock price / $1.50 EPS = 8 Thus the PE Ratio is 8 This particular P/E should be compared to the PE ratios of other companies of similar type (e.g. Ford compared to General Motors)

15. 7. What is Price to Book Value? This is a ratio where a company’s stock price per share is divided by a company’s book value per share Book Value / Outstanding Shares = Book Value per Share Let’s say the stock price is $25 per share Let’s say that Book Value is $30,000,000 and the number of outstanding shares is 10,000,000 $30,000,000 / 10,000,000 = $3 (Book Value per Share) Thus: $25 stock price / $3 BV per Share = $8.33 (Price/BV per share)

16. 8. What is Dividend per Share? Simply put, a dividend is a payment (all or part of recent company profits) to the shareholders calculated on a per share basis Let’s say a given company declares a dividend of $75,000,000. And let’s say there are 40,000,000 outstanding shares. $75,000,000 dividend / 40,000,000 shares = $1.88 dividend per share

17. 9. What is Dividend Yield? Dividend Yield is the measure of a Dividend per Share in relation to the current or recent stock price Let’s say, in the past year, a company declared an annual dividend of $4/share. Let’s also say the company has a current or recent price of $80 a share Thus: $4 dividend per share / $80 stock share price = 5% dividend yield

18. 10. What is a 52 Week High? A 52 week high is the highest price a given company’s stock price has reached in the past year (52 weeks) For example, let’s say an auto maker’s stock closed today at $20. Let’s also say that this same company’s stock closed at $42 ten months ago, the highest close for that company in the past year Thus the 52 week high for that company would be $42

19. 11. What is a 52 Week Low? A 52 Week Low is the lowest price a given company’s stock has reached in the past year. Let’s say an auto maker’s stock price closed today at $20 Let’s also say that this company’s stock price closed at $9 a couple of weeks ago. The 52 Week Low would be $9