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Understanding Retained Earnings and Market Metrics

The document outlines key financial concepts including retained earnings, which are cumulative net income minus dividends and treasury stock, and accumulated other comprehensive income (AOCI), which reflects unrealized gains or losses. It explains the calculation of common shares outstanding, market-to-book ratio, and defines the ask and bid prices of stocks. Additionally, it describes market capitalization as the total market value of all outstanding shares.

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13 views2 pages

Understanding Retained Earnings and Market Metrics

The document outlines key financial concepts including retained earnings, which are cumulative net income minus dividends and treasury stock, and accumulated other comprehensive income (AOCI), which reflects unrealized gains or losses. It explains the calculation of common shares outstanding, market-to-book ratio, and defines the ask and bid prices of stocks. Additionally, it describes market capitalization as the total market value of all outstanding shares.

Uploaded by

MarieJ29
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Module 8

Retained earnings:
 Cumulative Net Income recorded since the company’s inception minus
all dividends ever paid to shareholders minus all Treasury Stock ever
retired
 Earned Capital account

Accumulated Other Comprehensive Income or (Loss) aka AOCI


 Cumulative net unrealized (holding) gains or losses related to key
balance sheet accounts (primarily pensions, investment securities,
derivatives, and foreign currencies)
 These holding gains and losses will flow to the income statement when
they are realized
 Earned Capital account

Number of Common Shares Outstanding


= Issued Shares – Shares Repurchased by the Company

Market-to-Book Ratio
 Market Price per Share / Book Value per Share OR
 Market Capitalization / Book Value of Shareholders’ Equity
 In practice, Total Equity is usually used instead of Equity Attributable to
Company Stockholders because the amount of noncontrolling interest
is often immaterial and does not reflect the ratio

What is the “ask” price of a stock?


The published price at which a share of stock can be purchased

What is the “bid” price of a stock?


The published price at which a share of stock can be sold

Market Capitalization
The market value of all outstanding shares; also called Market Cap

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