Which profitability ratio requires the use of earnings per share and the current market price?
A) return on common stockholders' equity
B) dividend payout ratio
C) dividend yield
D) price-earnings ratio

Question

Quizplus · Accepted Answer

The price-earnings ratio is a profitability ratio that measures the current market price of a company's stock relative to its earnings per share. It is calculated by dividing the market price per share by the earnings per share. Therefore, option D requires the use of earnings per share and the current market price. Option A requires net income and common stockholders' equity, option B requires dividends paid and net income, and option C requires dividends per share and current market price.

Which Profitability Ratio Requires the Use of Earnings Per Share