BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Income or operating success for a given period of time
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Current market price of a company share relative to its per-share earnings
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How well a company can meet its short-term financial liabilities
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Net income available for payment to the holders of its common stock
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Detailed explanation-1: -Return on Equity (ROE) ROE is a key ratio for shareholders as it measures a company’s ability to earn a return on its equity investments. ROE, calculated as net income divided by shareholders’ equity, may increase without additional equity investments.
Detailed explanation-2: -Profitability ratios are financial metrics used by analysts and investors to measure and evaluate the ability of a company to generate income (profit) relative to revenue, balance sheet assets, operating costs, and shareholders’ equity during a specific period of time.
Detailed explanation-3: -The answer is a. The return on equity (ROE) is estimated by dividing the net income over the firm’s equity. It measures how much investors will receive on a dollar invested in the firm’s equity capital. The gross margin is also a profitability ratio, but operating expenses are not included in this ratio.
Detailed explanation-4: -Earnings Per Share (EPS) Earnings per share or EPS is a profitability ratio that measures the extent to which a company earns profit.