FINCB/571: Corporate Finance
Posted: December 31st, 2022
FINCB/571: Corporate Finance
Competency 1 – Reflection
Assignment Content
Reflection
This reflection is comprised of two sections, collectively totaling a minimum of 500 words. Complete your reflection by responding to all prompts.
Primary and Secondary Markets
You are a new economist for a major financial institution, and you’ve been invited to speak as a guest lecturer for a Freshman Finance course at the local university. Share how you would describe the overall purpose and mechanics of both primary and secondary markets. How would you explain the way the performance of your company is influenced by the activity of the markets you described?
ROE and EPS
You are a research analyst for a publicly traded company, and you’ve been assigned to give a presentation on how a company uses performance metrics in corporate valuation. Think about how you would present return on equity (ROE) and earnings per share (EPS) to a group of investors or senior management.
Explain the use of ROE and EPS in evaluating the value of a company. Include how to calculate ROE and EPS.
Why is understanding ROE and EPS important to a company’s value? ROE (return on equity) and EPS (earnings per share) are two financial metrics that are often used to evaluate a company’s performance and value. Understanding these metrics can be important to investors and other stakeholders as they can provide insights into the efficiency and profitability of a company.
ROE measures the profitability of a company by calculating the amount of net income that is generated in relation to the company’s equity. A high ROE indicates that a company is generating a good return on the investment of its shareholders.
EPS measures the profitability of a company by calculating the amount of net income that is generated per share of stock. A high EPS indicates that a company is generating a good return on the investment of its shareholders, and may also indicate that the company’s stock is undervalued, which could make it an attractive investment.
Understanding ROE and EPS can be important to a company’s value as they can provide insights into the efficiency and profitability of the company, which can impact the value of the company’s stock and the return on investment for shareholders.
Share an example of a company whose ROE and EPS you calculated.
What do these results say about the company?