The Financial Ratio Obtained by Dividing Net Income After Taxes

question 37

Multiple Choice

The financial ratio obtained by dividing net income after taxes by the number of shares of common stock outstanding is the _____.

• A) working capital
• B) return on owners' equity
• C) current ratio
• D) earnings per share
• E) return on sales ratio

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Definitions:

Operating Cycle

This refers to the period of time it takes for a business to purchase inventory, sell products, and receive cash from sales.

Sales on Account

Transactions in which goods or services are sold but payment is deferred, creating accounts receivable for the seller.

Cost of Goods Sold

Represents the direct costs attributable to the production of the goods sold by a company, including material, labor, and manufacturing overhead costs.

Average Sale Period

The average time it takes for a company to sell its inventory or products, often used to assess the efficiency of its sales processes and inventory management.