Which Profitability Ratio Requires the Use of Earnings Per Share

question 92

Multiple Choice

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 ratio
• D)Price/earnings ratio

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Definitions:

Diseconomies of Scale

The phenomenon where production costs per unit increase as the volume of output increases.

Constant Returns to Scale

A situation in economics where increasing the inputs in production proportionately increases the output.

Constant Returns to Scale

The situation where an increase in all inputs by a certain factor leads to an increase in output by the same factor, showing linear scalability in production.

Diseconomies of Scale

The phenomenon where production costs per unit increase as a firm's output expands, often due to inefficiencies that arise from becoming too large.