Public Corporation is a business in which securities are traded on public stock exchanges such as New York Stock Exchange and Nasdaq. Private companies are held only by their owners and are not publicly traded. When private shareholders receive periodic financial reports they are entitled to assume that their financial statements and footnotes have been prepared in accordance with GAAP, otherwise the business executive's chief executive The president obviously needs to warn shareholders that GAAP does not continue in more than one point. The content of the private business's annual financial report is often minimal. This includes three main financial statements: the balance sheet, the income statement and the cash flow statement. Chief executives, photographs, letters from charts are generally not.
In contrast, the annual report of the publicly traded company has many bells with it. In addition, report requirements are increasing. They present top management interpretation and analysis of business revenue performance and other important financial trends throughout the year, and management discussion and analysis (MD & A)
Another section necessary for public companies is EPS per share. This is the only ratio that most public companies report as well as some others, but public works are required to report. In addition, an annual comparative profit and loss statement is required.
Many public enterprises make their required applications with the SEC, but they present very different annual financial reports to their shareholders. Many publicly traded companies only contain condensed financial information, not comprehensive financial statements. They generally introduce a more detailed SEC financial report to readers
42 What is Price Price Earning Rate
Price / revenue (P / E) ratio is another measure of particular interest for investors in public works. The P / E ratio provides you with an idea how much you are paying for the current price of the stock for each dollar of revenue. Profit underpins the book value of the shares reported on the balance sheet, not the market value of the shares of the stock.
The P / E ratio is a reality check on how high the current market price is in relation to the underlying profit the business is acquiring. A very high P / E ratio is justified only if the investor thinks that the company's earnings per share (EPS) has a lot of potential upside in the future.
The P / E ratio is calculated by dividing the current market price of the stock at the end of the latest 12-month diluted EPS. The stock price bounces around the day a day and makes a big change in the sudden notice It is a target. The current P / E ratio should be compared with the average stock market P / E in order to decide whether the business goes above or below the market average.
The ratio of P / E is currently high, despite the sluggishness of the stock market four years. The P / E ratio varies year by year from industry to industry. EPS dollars in dynamic business in the growth industry can have a market value of $ 10 per dollar of profit, or net income, while EPS
In summary, the price-earnings ratio or the P / E ratio is calculated as the diluted earnings per share (EPS) or the lowest P / E at the end of the 12 months if the business does not report diluted EPS There may be notice underbalued shares or pessimistic forecasts by investors. High P / E may be able to reveal overestimated stocks or it may be based on optimistic prospects by investors.
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