There’s more to building the right portfolio than going with your gut feel. You need to understand the field by being familiar with the terms, know what contributes to a company’s value, what could affect your investment and what helps grow your portfolio value.
The three levels of profitability
This is the simplest calculation as it reflects total sales less the cost of sales, but doesn’t take into account operating costs, debt or tax.
Operating profit is a measure of a company’s operating efficiency as a whole, including all the expenses it incurs in its daily business activities.
The bottom line profit that reflects the income left after all expenses are paid, including interest and tax. This is where dividends come from.
Headline earnings per share
This is a measure of the total operational and capital investment earnings of a company, divided by the number of shares in issue.