The dividend yieldis the yield paid out by a company to shareholders in the form
of dividends, calculated by the amount of dividends paid per share over a year, then
divided by the stock’s price. For example, if a stock pays out $2 in dividends over the
course of a year and trades at $40, the dividend yield is 5 percent.
The P/E ratiostands for “price/earnings ratio,” a measure of a stock’s amount to
its earnings per share. It is a measure of a stock’s market capitalization divided by its
after-tax earnings over a 12-month period. The higher the P/E ratio, the more the
market is willing to pay for each dollar of annual earnings. Of course, companies with
negative earnings (or those that are not profitable) have no P/E ratio at all.
What are market indexes?
A market index is a statistical measure of the changes in a portfolio of stocks, all of
which represent a portion of the overall stock market. For example, the price of the
stock market index called the Dow index in the United States was determined by
adding up the prices of 12 of the largest public companies and dividing that number
by 12 (averaging the prices). Today, the Dow Jones Industrial Average uses 30 of the
largest and most influential companies in the United States to determine its stock
index, using much more complicated methods that call for the use of computers.
Is math used in accounting?
Yes, math is definitely used in accounting. The field includes the classification, analy-
sis, and interpretation of the financial records (or bookkeeping) of an institution,
company, or other enterprise, with most of the mathematics being addition and sub-
traction. Bookkeeping records not only tell the financial health of an organization—in
terms of profits or losses—but are also used for auditing and the occasional balancing
of a company’s ledger from a set period of time.
Bookkeeping has a long history. The idea was probably understood long before
mathematician Luca Pacioli’s (c. 1447–c. 1517) treatise on bookkeeping was published
in 1495 (for more about Pacioli, see p. 374). The idea of a double-entry bookkeeping
system—or a debit from an account and a corresponding credit in another account—
is popular today, but it was first used in medieval Europe.
What are economicsand econometrics?
Economics is a branch of the social sciences that deals with the production, distribu-
tion, and consumption of goods and services, including their management. The appli-
cation of mathematical and statistical techniques to economics and financial data is
called econometrics. It includes the study of problems, the analysis of data, and devel-
opment and testing of theories and models. 391