Accounting paper Essay Example | Topics and Well Written Essays - 750 words

Accounting paper - Essay ExampleReturn on equity (ROE), according to the analyst, is considered to be the most significant balance in order to evaluate a companys performance from an investors point of view. ROE measures a companys ability to have a descend on all of the capital that is being employed by the company. The ratio is calculated as net income upon total make outholders equity. The Stephens company ROE amount to 25.45% which can be comprehended as for every $100 invested in the equity of the company, the company generates a flow of $25. Any company has a negative financial leverage when the return on common stock holders equity is less than the return on assets. In the discussed case, Stephens company has a positive financial leverage and thus portrays a sound financial outlook.Earnings per share calculates the $ which is realize by the shareholder per share which is held by him. Stephens Company EPS is 7.90 which appears to be quite suitable and portrays sound and s trengthened financial outlook. The ratio is calculated by dividing net income minus the dividend paid on preferred stock per the common stocks outstanding throughout the year. Dividend payout ratio on the other hand is calculated by dividing the total dividend paid during the year with the net income. It is basically the percentage of the total net income during the year the directors of the company decide to give out as divided. From an investors point of view, the companies with higher dividend payout ratio are the best ventures to invest in.Price per Earning or P/E ratio is calculated by comparing the merchandise price per share with the EPS. Stephens companys P/E ratio is 7.59 which is lower than the industry average of 10. This could be due to the lower share price of Stephens company as compared to similar companies in the industry. Lower P/E ratio can