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8/3/2019 Ratio Analysis of Yahoo
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ASSIGNMENT
OF
Financial statement
Analysis
Project name: RatioAnalysis of
Submitted by: Safeer Ahmad
Submitted to: sir Muhammad
yasir
UNIVERSITY OF WAH, WAH CANTT
Created by: SAFEER AHMAD
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The History of Yahoo! - How It All Started:
Yahoo! began as a student hobby and evolved into a global brand that has changed
the way people communicate with each other, find and access information and
purchase things. The two founders of Yahoo!, David Filo and Jerry Yang, Ph.D.
candidates in Electrical Engineering at Stanford University started their guide in a
campus trailer in February 1994 as a way to keep track of their personal interests on
the Internet. Before long they were spending more time on their home-brewed lists of
favorite links than on their doctoral dissertations. Eventually, Jerry and David's listsbecame too long and unwieldy, and they broke them out into categories. When the
categories became too full, they developed subcategories ... and the core concept
behind Yahoo! was born.
The Web site started out as "Jerry and David's Guide to the World Wide Web" but
eventually received a new moniker with the help of a dictionary. The name Yahoo! is
an acronym for "Yet AnotherHierarchical Officious Oracle," but Filo and Yang insist
they selected the name because they liked the general definition of a yahoo: "rude,
unsophisticated, uncouth." Yahoo! itself first resided on Yang's student workstation,
"Akebono," while the software was lodged on Filo's computer, "Konishiki" - both
named after legendary sumo wrestlers.
Jerry and David soon found they were not alone in wanting a single place to find useful
Web sites. Before long, hundreds of people were accessing their guide from well
beyond the Stanford trailer. Word spread from friends to what quickly became a
significant, loyal audience throughout the closely-knit Internet community. Yahoo!
celebrated its first million-hit day in the fall of 1994, translating to almost 100
thousand unique visitors.
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Due to the torrent of traffic and enthusiastic reception Yahoo! was receiving, the
founders knew they had a potential business on their hands. In March 1995, the pair
incorporated the business and met with dozens of Silicon Valley venture capitalists.
They eventually came across Sequoia Capital, the well-regarded firm whose most
successful investments included Apple Computer, Atari, Oracle and Cisco Systems.They agreed to fund Yahoo! in April 1995 with an initial investment of nearly $2
million.
Realizing their new company had the potential to grow quickly, Jerry and David began
to shop for a management team. They hired Tim Koogle, a veteran of Motorola and an
alumnus of the Stanford engineering department, as chief executive officer and Jeffrey
Mallett, founder of Novell's WordPerfect consumer division, as chief operating officer.
They secured a second round of funding in Fall1995 from investors Reuters Ltd. and
Softbank. Yahoo! launched a highly-successful IPO in April 1996 with a total of 49
employees.
Today, Yahoo! Inc. is a leading global Internet communications, commerce and media
company that offers a comprehensive branded network of services to more than 345
million individuals each month worldwide. As the first online navigational guide to the
Web, www.yahoo.com is the leading guide in terms of traffic, advertising, household
and business user reach. Yahoo! is the No. 1 Internet brand globally and reaches the
largest audience worldwide. The company also provides online business and
enterprise services designed to enhance the productivity and Web presence of
Yahoo!'s clients. These services include Corporate Yahoo!, a popular customized
enterprise portal solution; audio and video streaming; store hosting and management;and Web site tools and services. The company's global Web network includes 25 World
properties. Headquartered in Sunnyvale, Calif., Yahoo! has offices in Europe, Asia,
Latin America, Australia, Canada and the United States.
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Assets in Millions of Dollars
YEARS 10-Dec 9-Dec 8-Dec 7-Dec 6-Dec
Cash and Equivalents 1,526 1,275 2,292 1,514 1,570
Restrictable Cash - - - - -
Marketable Securities 1,358 2,016 1,160 488 1,032
Receivables 1,029 1,003 1,060 1,056 931
Inventories - - - - -
Prepaid Expenses 433 300 233 67 218Current Deferred Income Taxes - - - 84 -
Other Current Assets - - - 30 -
Total Current Assets 4,346 4,595 4,745 3,238 3,750
Gross Fixed Assets 2,551 2,782 2,305 2,408 1,955
Accumulated Depreciation -898 -1,355 -769 -1,077 -853
Net Fixed Assets 1,653 1,427 1,536 1,332 1,101
Intangibles 256 356 486 611 406
Cost in Excess 3,682 3,640 3,441 4,002 2,969
Deferred Income Taxes - - - 300 -
Other Non-Current Assets 4,992 4,918 3,481 2,747 3,288
Total Non-Current Assets 10,583 10,341 8,944 8,992 7,763
Total Assets 14,928 14,936 13,690 12,230 11,514
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Liabilities in Millions of Dollars
YEARS 10-Dec 9-Dec 8-Dec 7-Dec 6-DecAccounts Payable 162 137 152 176 109
Short Term Debt - - - 750 -
Notes Payable - - - - -
Accrued Expenses - - - 853 1,047
Accrued Liabilities 1,209 1,170 1,140 - -
Deferred Revenues - - - 368 318
Current Deferred Income Taxes 255 411 413 13 -
Other Current Liabilities - - - 140 -
Total Current Liabilities 1,626 1,718 1,705 2,300 1,474
Long Term Debt - - - - 750
Deferred Income Tax 507 494 420 261 19
Other Non-Current Liabilities 56 123 218 123 102
Minority Interest 38 25 18 12 8
Capital Lease Obligations 143 83 77 - -
Preferred Securities of SubsidiaryTrust - - - - -
Preferred Equity OutsideShareholders' Equity - - - - -
Total Non-Current Liabilities 744 725 734 396 879
Total Liabilities 2,370 2,443 2,439 2,697 2,353
Preferred Shareholder's Equity - - - - -
Common Shareholder's Equity 12,558 12,493 11,251 9,533 9,161
Total Equity 12,558 12,493 11,251 9,533 9,161
Total Liabilities & Shareholder's
Equity 14,928 14,936 13,690 12,230 11,514
INCOME STATEMENTS in Millions of Dollars Dec-10 Dec-09 Dec-08 Dec-07 Dec-06
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Operating Revenue 6,325 6,460 7,209 6,969 6,426
Adjustments to Revenue - - - - -
Cost of Revenue -1,977 -2,172 -2,321 -2,287 -2,260
Gross Operating Profit 4,348 4,288 4,888 4,683 4,165
Selling/General/Admin Expense -1,753 -1,826 -2,268 -2,244 -1,851
Research & Development -1,082 -1,210 -1,222 -1,084 -833
EBITDA (Operating Income BeforeDepreciation) 1,513 1,252 1,397 1,355 1,481
Depreciation & Amortization -683 -739 -790 -659 -540
Operating Income 830 514 607 695 941
Interest Income 23 22 86 130 143
Other Income, Net 671 416 594 8 -1
Total Income Before Interest Expense (EBIT) 1,466 825 693 1,000 1,210
Interest Expense - - -9 - -
Income Before Tax 1,466 825 684 1,000 1,210
Income Taxes -222 -219 -259 -337 -458
Minority Interest -13 -7 -6 -3 -1
Net Income from Continuing Operations 1,232 598 419 660 751
Net Income from Discontinued Operations - - - - -
Net Income from Total Operations 1,232 598 419 660 751
Normalized Income 1,290 725 1,013 658
Extraordinary Income/Loss - - - - -
Special Income/Charges -58 -127 -594 2 15
Income from Cum. Effect of Acct Change - - - - -
Total Net Income 1,232 598 419 660 751
RATIO ANALYSIS
WORKING CAPITAL
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Interpretation:
Working capital ratio indicates that how much capital a company has for its daily operation.It is best that ratio should be positive. By calculating the working capital ratio we found that in2006 working g ratio of yahoo is $2276.In 2007 working capital ratio is $938, in 2008 workingcapital ratio is $3,040, in 2009 working capital ratio is $2,877 and in 2010 is $2,720. In first two yearratio is negative which shows that companys current liabilities are greater than its current assets.This means in first two years company short term financial position is not good.
CURRENT RATIO
Created by: SAFEER AHMAD
YEAR WORKING CAPITAL=(C.A - C.L) (in Millions of Dollars)
2006 2276
2007 938
2008 3,040
2009 2,8772010 2,720
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Interpration:
Created by: SAFEER AHMAD
CURRENT RATIO = CURRENT ASSET / CURRENT LIABILITESYEAR CURRENT RATIO
2006 2.544
2007 1.4078
2008 2.7829
2009 2.6746
2010 2.6728
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Current ratio indicates that how much current assets we have to pay liability. This ratiodetermines the short term liquidity position of company. By comparing the results of analysis yearsit is known that for pay $1 of current liability the company have $2.544 rupees of current asset in2006, $1.4078 in 2007, $2.7829 in 2008, $2.6746 in 2009 and $2.6728 in 2010. According to standardcompany financial position is good, but in 2007 not good.
Liquid Ratio
Created by: SAFEER AHMAD
LIQUID RATIO = CURRENT ASSET - INVENTORY PREPAID EXPENSECurrent liabilities
YEAR LIQUID RATIO
2006 2.39
2007 1.37
2008 2.64
2009 2.5
2010 2.40
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Interpretation:Quick ratio indicates that how much quick assets we have to pay current liability. By
comparing the results of analysis years it is known that the quick ratio is $2.39 in 2006, $1.37 in2007, $2.64 in 2008, $2.5 in 2009 and $2.40 in 2010 to pay a current liability of $1. According tostandard company financial position is good, but not in 2007. And in 2008 there is an increase butafter 2008 there is decreasing trend.
ABSOLUTE LIQUID RATIO
Created by: SAFEER AHMAD
ABSOLUTE LIQUID RATIO = ABSOLUTE LIQUID ASSET / CURRENTLIABILITES
YEAR ABSOLUTE LIQUID RATIO
2006 1.7652
2007 0.8704
2008 2.02462009 1.9155
2010 1.7736
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Interpretation:Absolute ratio indicates that how much absolute assets we have to meet current obligation. By
comparing the results of analysis years it is known that absolute ratio of yahoo in 2006 is $ 1.7652
to pay a current liability of $1. And $0.8704, $2.0246, $1.7736, $1.9155in 2007, 2008, 2009, and
2010 respectively.
SALES TO WORKING CAPITAL
SALES TO WORKING CAPITAL = NET SALES/AVG. WC
YEAR SALES TO WC RATIO
2006 2.8233
2007 7.4296
2008 6.8009
2009 2.2453
2010 2.3253
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Interpretation:Sales to W.C of yahoo are $2.8233, $7.4296, $6.8009, $2.2453, $2.3253 in 2006,
2007,2008,2009,2010 respectively. Which show that in 2006 company is not performing well but in2007 sales to W.C is $7.4296 which shows Than2006 Company performs well. In 2008 sale to W.Cis $6.8009 which is good but not better than 2007 and in 2008 and 2009 company not performingwell.
A/C REC. T/O RATIO
Created by: SAFEER AHMAD
A/C REC. T/O RATIO=NET.CR SALE/AVG GROSS REC.
YEAR A/S REC. T/O RATO(TIMES)
2006 6.9022
2007 6.5594
2008 6.8009
2009 6.4406
2010 6.1467
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Interpretation:A/R turnover ratio indicates that how many times company makes credit sales during the
period. By calculating the A/R turnover ratio we found that in 2006 we makes 6.9022 times creditsales in 2007 makes 6.5594 times credit sales and 6.8009 times in 2008, 6.4406 times in 2009 and6.1467 times in 2010.
A/C REC. T/O IN DAYS
Created by: SAFEER AHMAD
A/C REC. T/O IN DAYS=NO. OF WORKING DAYS IN YEAR/ACC.RECT/O
YEAR A/C REC T/O IN DAYS2006 53
2007 55
2008 54
2009 57
2010 59
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Interpretation:Collection period determines that how many days we spent to makes one time credit sales.
By comparing the results of analysis years it is known that in 2006 company spend 53days to make1 time credit sales. And also spend 55 days in 2007, 54 days in 2008, 57 days in 2009 and 59 days in2010.
OPERATING CYCLE
Created by: SAFEER AHMAD
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Interpretation:Operating cycle indicates that how many days involve to converting the raw material in to
cash. After analysis we come to know that in 2006 53 days involve to convert the raw material intocash. 55 days in 2007, 54 days in 2008, 57 days in 2009 and 59 days in 2010.
DEBT RATIO
Created by: SAFEER AHMAD
OPERATING CYCLE=INVENTORY T/O IN DAYS+ACC REC T/O
IN DAYS
YEAR OPERATING CYCLE
2006 53
2007 55
2008 54
2009 57
2010 59
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Created by: SAFEER AHMAD
DEBT RATIO= T.LIABITILIES / T.ASSESTS
YEAR DEBT RATIO
2006 0.2043
2007 0.2205
2008 0.1781
2009 0.1635
2010 0.1587
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Interpretation:Debt ratio indicates the firm long term debt paying ability. Debt ratio indicates the total
liability of a firm. By calculating the debt ratio of yahoo we found that in 2006 company have $1total assets to pay $0.2043 total liability and have$ 1 total assets to pay total liability of $0.2205,$0.1781
,$0.1635
,$0.1587
in 2007,2008,2009,2010 respectively. There is an increasing trend from2006 to 2007 of total liabilities then it decreasing in 2008, 2009, and 2010.
Debt to Equity Ratio
Debt to Equity Ratio=Long Term Debt/Shareholder Equity
YEAR Debt to Equity Ratio
2006 0.081
2007 0
2008 0
2009 0
2010 0
Only in 2006 long term debt is given.
Interpretation:This ratio also indicates the long term debt paying ability of company. It also
determines how well creditors are protected in case of in insolvency. This trend indicates
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that we have $ 1 shareholder equity to pay $0.0777 long term debt in 2006.and no long term
debts are taken for further years.
FIXED ASSESTS TO EQUITY
Interpretation:
Created by: SAFEER AHMAD
FIXED ASSESTS TO EQUITY= FIXED ASSEST / S.H EQUITY
YEAR FIXED ASSEST TO EQUITY
2006 0.1201
2007 0.1397
2008 0.1365
2009 0.1142
2010 0.1677
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This ratio determines that how much amount of shareholder equity spends on fixed assets.In 2006 $0.1201 used to buy fixed assets. $0.1397 in 2007,$ 0.1365 in 2008, $0.1142 in 2009, $0.1677in 2010.
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GROSS PROFIT MARGIN
Interpretation:This ratio determines the margin of gross profit in net sales. In 2006 the margin of G.P in
net sales is 64.8148%.margin of G.P in sales in 2007 is 67.1975%.and 67.8041% in 2008, 66.3777%in 2009, and 68.743% in 2010.
NET PROFIT MARGIN
Created by: SAFEER AHMAD
GROSS PROFIT MARGIN=G.P / N.SALES * 100
YEAR GROSS PROFIT MARGIN
2006 64.8148
2007 67.1975
2008 67.8041
2009 66.3777
2010 68.743
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Interpretation:This ratio determines the margin of net profit in net sales. In 2006 the margin of net profit in
net sales is 11.68%.margin of net profit in sales in 2007 is 9.47%.and 5.81% in 2008, 9.25% in 2009,and 19.47% in 2010.
OPERATING PROFIT MARGIN
Created by: SAFEER AHMAD
NET PROFIT MARGIN=NPAIT / N.SALES * 100
YEAR NET PROFIT MARGIN
2006 11.68
2007 9.47
2008 5.81
2009 9.25
2010 19.47
OPERATING PROFIT MARGIN=O.P / N.SALES * 100
YEAR OPERATING PROFIT MARGIN
2006 14.64
2007 9.97
2008 8.42
2009 7.95
2010 13.12
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Interpretation:This ratio determines the margin of operating profit in net sales. In 2006 the margin of
operating profit in net sales is 14.64%.margin of operating profit in sales in 2007 is 9.97%.and8.42% in 2008, 7.95% in 2009, and 13.12% in 2010.
TOTAL ASSETS TURNOVER
Created by: SAFEER AHMAD
TOTAL ASSETS TURNOVER=NET SALES/ AVG.TOTALASSETS * 100
YEAR TOTAL ASSETS TURNOVER
2006 0.55
2007 0.58
2008 0.55
2009 0.45
2010 0.42
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s
Interpretation:This ratio determines the activity of the assets and the ability of the firm to generate sales by
using the total assets. By analyzing the five year data we found that in 2006 by using total assets wemake sales of $0.55. In 2007 generate the sales of $0.58. Generate the sales of $0.55, $0.45, $ 0.42 in2008, 2009, and 2010 respectively.
DUPONT ROA
DUPONT ROA = NET PROFIT / T. ASSEST
YEAR DUPONT ROA
2006 0.0652
2007 0.054
2008 0.0306
2009 0.04
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2010 0.0825
Interpretation:This ratio determines the activity of the assets and the ability of the firm to generate profit
by using the total assets. By analyzing the five year data we found that in 2006 by using total assetswe generate profit of $0.0652. In 2007 generate the profit of $0.054. Generate the profit of $0.0306,$0.04, $ 0.0825 in 2008, 2009, and 2010 respectively.
OPERATING ASSESTS T/O
Created by: SAFEER AHMAD
OPERATING ASSESTS T/O = NET SALES/AVG OPASSESTS
YEAR OPERATING ASSESTS T/O
2006 0.82
2007 0.83
2008 0.8
2009 0.67
2010 0.6
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Interpretation:This ratio determines the activity of the assets and the ability of the firm to generate sales by
using the operating assets. By analyzing the five year data we found that in 2006 by using operatingassets we make sales of $0.82. In 2007 generate the sales of $0.83. Generate the sales of $0.8, $0.67,$ 0.6 in 2008, 2009, and 2010 respectively.
RETURN ON T.EQUITY
Created by: SAFEER AHMAD
RETURN ON T.EQUITY = NPAIT / AVG. TEQUITY
YEAR RETURN ON T.EQUITY
2006 0.082
20070.07
20080.04
20090.05
20100.098
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Interpretation:Return on total equity measures the return on both common and preferred stockholders. In
2006 return on total equity is $0.082.return on total equity $0.07 in 2007, $0.04 in 2008, $0.05 in2009, $0.098 in 2010.
RETURN ON INVESTMENT
LONG TERM FUNDS = LONG TERM DEBTS+LONG TERM SHARE HOLDERS
Created by: SAFEER AHMAD
RETURN ON INVESTMENT = NPBIT/LONGTERM FUNDS
YEAR RETURN ON INVESTMENT
2006 1.6133
2007 _
2008 _
2009 _ 2010 _
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ONLY IN 2006 LONG TERM DEBT ARE AVAILABLE THERE IS NO DATA AVAILABLE OF
LONG TERM DEBTS AND LONG TERM SHARE HOLDERS FOR OTHER YEARS SO NO
CALCULATIONS WILL BE PERFORMED.
Interpretation:Return on investment ratio is used to measure the operating income earned on the invested capital.
In 2006 we earned the operating income of $1.6133 on invested capital.
DUPONT RETURN ON OP ASSEST
Created by: SAFEER AHMAD
DUPONT RETURN ON OP ASSEST=OPPROFIT/AVG OP ASSEST
YEAR DUPONT RETURN ON OP ASSEST2006 0.121
2007 0.083
2008 0.067
2009 0.053
2010 0.079
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Interpretation:This ratio determines the activity of the assets and the ability of the firm to generate profit
by using the operating assets. By analyzing the five year data we found that in 2006 by usingoperating assets we generate profit of $0.121. In 2007 generate the profit of $0.083. Generate theprofit of $0.067, $0.053, $ 0.079 in 2008, 2009, and 2010 respectively.
RETURN ON COMMON EQUITY
PREFFERED DIVIDEND NOT AVAILABLE IN DATA.
Created by: SAFEER AHMAD
RETURN ON COMMON EQUITY=NPAIT-PREFFERD DIVDEND/AVG COMMON
STOCK
YEAR RETURN ON COMMON EQUITY
2006 0.082
2007 0.07
2008 0.04
2009 0.05
2010 0.098
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Interpretation:
This ratio measures the return to the common stockholder, the residual owner. In 2006return on common equity is $0.082. $0.07 return on common equity in 2007.$ 0.04, $0.05, $0.098return on common equity in 2008, 2009, and in 2010 respectively.
TIMES INTEREST EARNED
TIMES INTEREST EARNED = NPAIT /INTEREST
YEAR TIMES INTEREST EARNED
2006 -
2007 -
2008 46.55
2009 -2010 -
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SALES TO FIXED ASSETS
Sales To Fixed Assets=Net Sales/Avg NetFixed Assets
YEAR Sales To Fixed Asset
2006 5.83
2007 5.72
2008 5.02
2009 4.36
2010 4.1
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Interpretation:This ratio indicates that how much sales we make by using fixed assets. In 2006 we make the sales
of $ 5.83. And make the sales of $5.72, $5.02, $4.36 and $4.1 in 2007, 2008, 2009, and 2010
respectively.
DEGREE OF FINANCIAL LEVERAGE
Degree of Financial Leverage=EBIT/EBT
YEAR Degree of Financial Leverage
2006 1
2007 1
2008 1.01
2009 1
2010 1
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Interpretation:This ratio tells us 1% change in EBIT brings how much change in EBT. In 2006 1% change
in EBIT bring 1 change in EBT.1 in 2007, 1.01 in 2008, 1 in 2009, and 1 in 2010.after analysis wefound 2008 year is best.
DILUTED EARNINGS PER COMMON SHARE
Diluted Earnings per Common Share= N.I -Preferred Dividend/AvgS Common Share
Outstanding
YEAR Diluted Earnings per Common Share
2006 0.52
2007 0.47
2008 0.29
2009 0.42
2010 0.9
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No data for calculation is given but Diluted EPS from Total Operations is given in company data
Interpretation:This ratio determines the amount of income earned on a share of common stock during the
accounting period. In 2006 $0.52 income earned on a share of common stock.$0.47 in 2007, $0.29in 2008, $0.42 in 2009, and $0.90 in 2010.
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