Samenvatting
Summary Business vocabulary in use
- Instelling
- Hogeschool InHolland (InHolland)
Elaboration of Units 45 t/m 59 of the book Business vocabulary in use. With Dutch translation of the difficult words.
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Voorbeeld van de inhoud
Engels grammatica toetsUnit 45-59
Unit 45 Shareholder value (aandeelhouderswaarde)
Investors look at the yield (opbrengst) of a company’s shares – the dividend per share that
it pays out in relation to the share price. For example, a company whose shares are worth
€20 and that pays a dividend of €1 has a yield of 5 per cent.
Those investors interested in high dividend payouts look for income shares – shares that
have high dividends in relation to their prices. Others look for growth shares, typically with
lower yields, if they think the company’s profits will grow over the coming years and that the
shares will increase in value
But companies do not pay out all their earnings in dividends each period. Not all earnings
are distributed (verdeeld) to shareholders; companies keep some as retained earnings
(ingehouden inkomsten).
Investors want to know how well their money is working for them and one way of doing this is
to look at the earnings per share (EPS). This is calculated by dividing the after-tax profit by
the number of shares outstanding – the number issued and in existence (bestaan). For
example, if a company has an after-tax profit of €1 million and has four million shares
outstanding, it has EPS of 25 cents.
Investors can also use the earnings per share to work out the price-earnings ratio (PE
ratio) – this is the share price divided by the earnings per share. A company with EPS of 25
cents and a current share price of €5 has a PE ratio of 20.
This ratio gives an idea of how expensive a share is in relation to the profit the company is
making. If investors are willing to pay for shares with higher-than-average PE ratio, it may be
because they expect the company to have higher-than-average profits growth in the future
and they are thus willing to pay more for these higher predicted earnings.
Shareholders in a company obviously want to maximize their return on investment (ROI) or
return. They increasingly look at how the company is managed in terms of shareholder
value – the total amount the shares they hold are paying out in dividends – and the increase
in the value of their shares during the time that they hold them.
If a company’s shareholders could get the same or better ROI by putting their money on
deposit (storting) in a bank, they will not be too pleased with the company’s managers. So
shareholders are watching senior managers’ decisions increasingly closely. A company may
say that it wants to maximize shareholder value, and use its assets (middelen) and
potential assets in the most profitable way. This implies key strategic decisions such as
making the right acquisitions, and divestment (desinvestering) of business units that do not
make enough profit even if they are not actually loss-making.
Unit 46 Accounting standards
Every company appoints auditors – specialist external accountants – who audit (controleert)
its accounts. The auditors approve the accounts if they think they give a true and fair view
of the company’s situations. If not, they specify the qualifications they have about the
accounts. If auditors do this, it certainly gets investors worried!
Companies that give misleading – false – information in their accounts are said to cook
the books. They may overstate or understate particular amounts – indicating that they are
more or less than they really are. Companies that do this are guilty of fraud.
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