Reading a company: fundamentals

Q1. Which statement best describes “Profit and loss statement”?

1. Pledged shares are promoter shares put up as security for a loan. If the price falls, lenders can sell them, which can hit the share price.
2. Dividend yield is the annual dividend per share divided by the share price, shown as a percentage. It is the cash return before any price change.
3. The P/B ratio compares the share price with book value per share, the net worth of the company divided by shares. It is often used for banks.
4. The profit and loss statement shows a company’s revenue, costs and profit over a period such as a quarter or a year.

Q2. Which statement best describes “Price-to-earnings (P/E) ratio”?

1. The P/E ratio is the share price divided by earnings per share. It shows how much investors pay for each rupee of earnings.
2. Interest coverage is operating profit divided by interest expense. It shows how comfortably a company can pay its interest bills.
3. Pledged shares are promoter shares put up as security for a loan. If the price falls, lenders can sell them, which can hit the share price.
4. Dividend yield is the annual dividend per share divided by the share price, shown as a percentage. It is the cash return before any price change.