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

Earnings per share, return on sales, and return on equity are examples of __________ ratios.

liquidity

activity

profitability

solvency

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Verified step by step guidance

Understand the concept of profitability ratios: Profitability ratios measure a company's ability to generate profit relative to its revenue, assets, equity, or other financial metrics. These ratios are crucial for assessing the financial health and performance of a business.

Identify examples of profitability ratios: Earnings per share (EPS), return on sales (ROS), and return on equity (ROE) are all examples of profitability ratios. Each of these metrics evaluates different aspects of profitability.

Differentiate profitability ratios from other types of ratios: Liquidity ratios measure a company's ability to meet short-term obligations, activity ratios assess operational efficiency, and solvency ratios evaluate long-term financial stability. Profitability ratios focus specifically on profit generation.

Relate the examples to their definitions: EPS measures the profit allocated to each share of common stock, ROS evaluates the percentage of revenue converted into profit, and ROE assesses the return generated on shareholders' equity.

Conclude that the correct classification for EPS, ROS, and ROE is profitability ratios, as they all measure aspects of a company's ability to generate profit.