What Is the Purpose of Computing the Earnings Per Share

question 203

Multiple Choice

What is the purpose of computing the earnings per share ratio?

• A) To determine which firm gets the most out of its resources
• B) To determine the net profit margin
• C) To measure a firm's ability to meet its current liabilities
• D) To attract investors
• E) To measure the net income earned by a business for each dollar invested

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Definitions:

Assets

Resources owned by a business that have economic value and are expected to provide future benefit.

Liabilities

Financial obligations or debts that a company owes to others, which must be paid back in the future.

Operating Income

A measure of a company's profit generated from its core business operations, excluding deductions of interest and taxes.

Advertising Expense

Advertising expense is the cost incurred by a company to promote its products or services through various advertising mediums to attract customers.