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Net Earnings / Average Shares Outstanding
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Capitalization Rate =
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Market Price of Common Stock
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Explanation of Capitalization Rate:
The Capitalization Rate measures the rate of return on one
share of company stock by comparing the earnings per share to the price of one
share of stock.
Importance of Capitalization Rate:
A high, or increasing Capitalization Rate is usually a positive
sign, showing that the company may be able to provide a healthier return for
its stockholders. If there have been changes in the stock price, other
reasons should be investigated as to why these changes occurred.
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