Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

14. Financial Statement Analysis

Ratios: Earnings Per Share (EPS)

Financial Accounting

14. Financial Statement Analysis

Ratios: Earnings Per Share (EPS)

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Multiple Choice

A ratio that divides market value (price) per share by earnings per share (EPS) is called:

Earnings Yield

Dividend Yield

Return on Equity (ROE)

Price-Earnings (P/E) Ratio

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Verified step by step guidance

Understand the concept of the Price-Earnings (P/E) Ratio: It is a financial metric used to evaluate the relative value of a company's shares by comparing its market price per share to its earnings per share (EPS).

Recognize the formula for the P/E Ratio: \( \text{P/E Ratio} = \frac{\text{Market Price per Share}}{\text{Earnings per Share (EPS)}} \). This formula divides the market value of a share by the company's earnings per share.

Identify the components: The market price per share is the current trading price of a single share of the company's stock, and the EPS is the portion of a company's profit allocated to each outstanding share of common stock.

Compare the P/E Ratio to other financial metrics: Unlike Earnings Yield, Dividend Yield, or Return on Equity (ROE), the P/E Ratio specifically focuses on the relationship between market price and earnings, making it a key indicator of investor sentiment and valuation.

Apply the concept: When solving problems related to the P/E Ratio, ensure you have the market price per share and EPS values. Plug these values into the formula to calculate the ratio, but remember that the problem here is conceptual, so no calculation is required.