Stock Market Terms By Letter: E

E

Earnings: The profit of a company. This term generally refers to the after-tax, post Minority Interest but before Extraordinary Items profit.

Earnings Per Share (EPS): The commonest measure of the worth of a share. It is obtained by dividing the Earnings of a firm by the number of shares outstanding.

Earnings Yield: An alternative measure to PER. It is obtained by dividing the Earnings Per Share (EPS) by the price of the share. It is the reciprocal of the Price Earnings Ratio.

Earnings Multiple (EM): The number of times the price of a share is greater than its Earnings Per Share. This is the reciprocal of Earnings Yield and is more usually known as Prices Earnings Ratio (PER or PE).

Efficient Market Hypothesis (EMH): A theory which is popular in the West regarding stock market behaviour. This theory holds that the stock market is very good at pricing stocks such that overall, stocks are accurately priced so as to reflect their future return expectation. If this theory is correct, it will not be possible for an individual to obtain consistently stock market return which is higher than the market average.

 

Equity Capital: This refers to the part of the Capital which is provided by the shareholders. The common shares of a listed company is also known as ‘Equities’.

Ex: Without. Shares which are bought Ex-rights or Ex-dividend does not entitle the new holder to these benefits (the opposite of ‘Cum’).

Exceptional Items: Same meaning as Extraordinary Items.

Extraordinary Items: Surpluses (or deficits) arising from transactions outside the normal Course of business. These are excluded when computing the Earnings of the company.