Professional Documents
Culture Documents
b. A high price/EBITDA ratio reflects the stock markets positive assessment of the firms
generation of profits through ongoing operations. It measures how much an investor
must spend to buy a dollar of EBITDA.
Price/EBITDA Ratio
Market price per share
EBITDA per share
Page 74, Subunit 3.4, 1.e.: This change removes incorrect information.
d. Diluted Earnings Per Share (DEPS)
1) The numerator is increased by the amounts that would not have had to be paid if
dilutive potential common stock had been converted, namely, dividends on
convertible preferred stock and after-tax interest on convertible debt.
2) The denominator is increased by the weighted-average number of additional shares
of common stock that would have been outstanding if dilutive potential common
stock had been converted.
e. If EPS is used as part of a ratio calculation (e.g., price-earnings), DEPS should be used
if available.
Copyright 2014 Gleim Publications, Inc. and/or Gleim Internet, Inc. All rights reserved. Duplication prohibited. www.gleim.com
Page 2 of 2
Copyright 2014 Gleim Publications, Inc. and/or Gleim Internet, Inc. All rights reserved. Duplication prohibited. www.gleim.com