Question
2/2 pts All of the following are investment ratios designed to help shareholders assess the returns on their investment, except: Current ratio Dividend yield ratio Price to earnings ratio Earnings per share ratio
Answer
4.3
(241 Votes)
Amy
Veteran · Tutor for 11 years
Answer
The Current ratio is not an investment ratio according to financial principles. The remainder; Dividend yield ratio, Price to earnings ratio, Earnings per share ratio are all investment ratios as they provide insights related to, predict future investors return or exhibiting the performance and the profitability of a company. Consequently, 'Current ratio' is the correct response in this context.
Explanation
## Investment ratios are financial metrics utilized by investors and analysts to appraise the performance, profitability, and value of a company, enabling them to make informed decisions about investment tactics. The suggested options are presumed to be investment ratios, but let’s analyze each to ensure:### 1. Current ratio: This ratio is a measure of liquidity rather than an investment ratio. It specifically demonstrates a corporation's ability to pay back its short-term liabilities (debt hence arrears) with its short-term assets, such as cash, assets that are easily turn into cash, or assets which are already in cash form - accounts receivable and inventory. It does not provide data related to return on investments.### 2. Dividend yield ratio: An investment ratio applicable to the return an investor can anticipate to get in relation to the price of the stock. It signifies the portion of the dividend to share price.### 3. Price to earnings ratio: A comparison ratio used commonly to determine company's relative valuation, by taking the company market price per share and dividing it by latest fiscal year Earning per Share (EPS).### 4. Earnings per share ratio: An investment ratio as it basically analyses the piece of total company profit allocated to each share of equity. The portion serves as demonstration of corporation's earnings growth and predictions about future earnings.