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Term
Earnings Per Share
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Term
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Definition
| Firms that do not have ( 1) outstanding convertible bonds or convertible preferred stock that holders can exchange for shares of common stock or ( 2) options or warrants that hold-ers can use to acquire common stock have simple capital structures. |
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Term
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| Firms that have convertible securities and/ or stock options or warrants outstanding have complex capital structures. |
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Term
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Definition
| does not consider the amount of assets or capital required to generate a particular level of earnings |
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Term
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Definition
| Common- size income statements express all line items scaled by revenues ( generally the largest line item on the income statement and the driver of many expenses); common- size balance sheets express all line items scaled by total assets ( generally the largest line item on the balance sheet and reflective of resources used to generate returns to all providers of capital). |
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Term
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Definition
| The profitability of the two firms can be compared more meaningfully by scaling net income and the individual expense line items to a common denominator ( each firm’s total revenues) to remove the large discrepancy in the size of the two firms’ operations. |
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Term
| Other Comprehensive Income |
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Definition
| Such items include certain foreign currency translation items, defined benefit pension plan and other postretirement plan adjustments, certain unrealized gains and losses on investment securities and derivatives, and other adjustments. |
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| Rate of return measures presume that a certain amount of investment generates economic profits. |
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| Two Most Popular Rates of Return |
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Definition
| ROA and ROCE for creditors and shareholders |
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Term
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Definition
| Net Income from Continuing Operations + (1-Tax Rate)(Interest Expense) + Minority Interest in Earnings / Average Total Assets |
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