How To Calculate Stock Terms

This lesson covers an overview of common stock terms, including shares outstanding, earnings per share, price to earnings ratio, dividend yield, and book value per share. The instructor uses Johnson & Johnson as an example to demonstrate how to calculate these terms and provides a brief explanation of each. In addition to this, the lesson outlines the steps to calculate a company’s debt to equity ratio, book value and price to book value. The debt to equity ratio is calculated by adding the company’s debt and dividing it by the total equity, while the book value is calculated by dividing the total equity by the number of shares outstanding. The price to book value is calculated by dividing the current market price of the stock by its book value and can be found on MSN Money’s Key Ratios tab. It is important to consider the company’s earnings, dividend, and book value growth, which can be seen on the Key Ratios ten-year summary and the book value per share, in order to properly value the company rather than relying solely on the price to book value. Note that it is not recommended to look at equity growth from the balance sheet.