Question

1. Which profitability ratio requires the use of earnings per share and the current market price?...

1.

Which profitability ratio requires the use of earnings per share and the current market price?

a.Dividend yield ratio.

b.Price/earnings ratio.

c.Dividend payout ratio.

d.Return on common stockholders' equity.

2.

Squid Lips, Inc. wants to measure the relationship between profitability and the investment made by stockholders. Squid Lips should use the

a.return on stockholders' equity ratio.

b.statement of retained earnings.

c.profit margin.

d.earnings per share.

3.

Starship Inc.'s gross profit ratio decreased from 36.5% in 2017 to 28.6% in 2018. What is the trend in this change?

a.It depends on whether net sales increased or decreased during the period.

b.It is a downward negative trend.

c.It is an upward positive trend.

d.Trends cannot be determined without the dollar amount of the increase provided.

4.

Which profitability ratio requires the use of earnings per share in its calculation?

a.Price/earnings ratio.

b.Return on common stockholders' equity.

c.Profit margin.

d.Dividend yield ratio.

Business   Accounting   
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Homework Answers

Answer #1

1) Answer: b) Price/Earnings ratio

explanation

price /earning ratio is one of the profitability ratio establishes the relationship between the earnings per share and current market price.

price/earnings ratio=current Market price/EPS

2) answer : Return on shareholders equity ratio

explanation

Return on shareholders equity ratio is useful to measure the relationship between the profitability and investment made by shareholders .

since the return on shareholders equity = net income / average shareholders equity *100

3) answer: b) Downward negetive trend

explanation

since the decerease in gross profit ratio from 2017 to 2018 is a downward negetive trend .

4) answer : a) Price/Earning ratio

explanation

since the price/earning ratio is the relationship between the EPS and the current market price .

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