What Is the Accounting Relationship in Which Earnings Per Share

question 13

Multiple Choice

What is the accounting relationship in which earnings per share minus dividends equal the change in book value per share called?

• A) clean surplus relationship
• B) economic value added relationship
• C) accounting earnings identity
• D) payout-retention identity
• E) dividend valuation equation

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Definitions:

Price/Earnings Ratio

A valuation metric for evaluating the relative worth of a company, calculated as market value per share divided by earnings per share.

Market Price Per Share

This is the current price at which a single share of a company's stock can be bought or sold in the market.

Return on Equity

A measure of a corporation's profitability, calculated as net income divided by shareholder's equity.

Debt-Equity Ratio

A financial metric used to evaluate a company's leverage, by calculating the division of its total debts by the equity of its investors.