What is Profit&Loss (P&L) Statement ?

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Definition : Also known as Income statement, is a financial statement which shows expenses and revenue of a company during a particular period, usually a fiscal quarter or year.
Read : What Is Balance Sheet ?
Income Statement helps to convey the status of a company i.e. Company is making profit or suffering losses. It is very important to read Income Statement of a company before investing, both of recent and past years.
Note : Revenue : Total amount received from sales of goods and services. Expenses : Total amount spend in producing final product or service.
Structure of P&L Statement  Income Statement is divided into Five main section - Net sales, Cost of Goods Sold, Gross Margin, Operating Expenses and Net Profit Before & After Income Tax (Or Net Loss in case of Loss).
Net Sales : It is the sum of Gross sales excluding its returns, allowances and discounts.Cost Of Goods Sold : Amount of money used to produce the final product. For example cost of inventory, merchandise purchased…

What Is Dividend and Dividend Yield ?


DIVIDEND

Definition :
Dividend is defined as the sum of money paid regularly (typically quarterly or annually) by a company to its shareholders out of its profits.

Explanation :
You can also refer dividend as a reward that a company gives to its Shareholders. Dividend can be issued in various forms such as Stocks, Cash or any other forms. A Company’s net profit are an important factor in determining dividend. Net profits can be allocated to shareholders via a dividend or kept within the company as retained earnings.
There are number of methods taken by the company to pay out dividends, such methods are known as dividend payout policies.


Note : Increasing or decreasing rate of dividend are taken as the signals to the market Ups and downs. For e.g. If a company has long history of past dividend payments, reducing the dividend amount may signal to investors that the company could be in trouble. Alternatively, increase in the dividend rate might be a positive sign to the market.

There is no tax applicable on dividend you earn that's why earning dividend is more profitable. Always try to invest in larger, established companies as they have more predictable profits and are the best dividend payers. These companies tend to issue regular dividends as they seek to maximize shareholders wealth. Always try to choose industries or sector like basic materials, oil and gas, banks and financials, health care and real state, as these are the top dividend payers yet. Small companies have bad record on paying dividends as they always try to reinvest their earnings to maximize their business which also ultimately profitable to both the company and shareholders.


DIVIDEND YIELD 

Definition : Also called dividend price-ratio, defined as, a dividend expressed as a percentage of a current share price.

Explanation : 
A financial ratio that indicates how much a company pays out in dividend each year relative to its share price. Dividend is always paid using nominal value of a share. It is computed by dividing the dividend per share by the market price per share and multiplying the result by 100.

                                        Dividend per share
Dividend yield(%) =     ——————————   x 100
                                     Market price per share
Example : 
Lets take Two company S.Investors and Youclyck, both are paying ₹60/share as dividend. Price of one share of S.Investors is ₹2000 while of Youclyck is ₹3000. As both company is paying same amount of dividend, with the help of  dividend yield we will be able to understand how much percentage of dividend each company is paying. 




From the above solution we saw that both the company are paying same amount of money but percentage is different for both company.
This is how dividend yield is very important to understand that how much dividend is paid by a company to its shareholder. 


Note: If you look for company with increasing dividend yield you must need to take a good look at how dividend yield is increasing, that is, dividend yield is increased by the company or increased due to decreasing share price. 
For e.g. if we look at the previous example, Youclyck is paying 2% of dividend yield with price of 3000 but if the price goes down to 1500 then dividend yield will be 4% as ultimately company is paying the same amount but dividend yield is increased. So before coming to any conclusion while investing you must need to aware of every possible things.

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