Comparing dividends per share to earnings per share indicates the extent to which the corporation is retaining its earnings for use in operations.

Question

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Comparing dividends per share (DPS) to earnings per share (EPS) shows the proportion of earnings a company is distributing to its shareholders as dividends versus what it is retaining for reinvestment in the business. A lower ratio indicates more earnings are being retained for operations.

Comparing Dividends Per Share to Earnings Per Share Indicates the Extent