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

Introduction to Ratios

Financial Accounting

14. Financial Statement Analysis

Introduction to Ratios

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Multiple Choice

Which of the following ratios is commonly used to assess the performance of a company's stock?

Debt to Equity Ratio

Inventory Turnover Ratio

Earnings per Share (EPS)

Current Ratio

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Verified step by step guidance

Understand the purpose of the question: The goal is to identify which financial ratio is commonly used to assess the performance of a company's stock.

Review the options provided: Debt to Equity Ratio, Inventory Turnover Ratio, Earnings per Share (EPS), and Current Ratio.

Clarify the concept of Earnings per Share (EPS): EPS is a financial metric that indicates the portion of a company's profit allocated to each outstanding share of common stock. It is calculated using the formula:

\frac{Net Income - Preferred Dividends}{Weighted Average Shares Outstanding}

Explain why EPS is relevant: EPS is a key indicator of a company's profitability and is widely used by investors to evaluate the performance of a company's stock. Higher EPS values generally suggest better financial health and profitability.

Conclude that EPS is the correct answer: Among the options provided, Earnings per Share (EPS) is the most appropriate ratio for assessing the performance of a company's stock.