Question
Which of the following is considered a fundamental measure for shareholders wishing to assess the returns on their investments: Earnings per share ratio Current ratio Gearing Ratio Interest cover ratio Inventory turnover period ratio
Answer
4
(158 Votes)
Eliza
Master · Tutor for 5 years
Answer
Earnings per share ratio
Explanation
## Step 1:First, we need to understand each item on the list. - **Earnings per share ratio (EPS)** is a key measure used by investors to gauge a company’s profitability. It represents the portion of a company's profit allocated to each outstanding share of common stock.- The **Current ratio** is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations, it's not directly related to the investors' return.- The **Gearing ratio** is a financial ratio that compares a company's owners' equity or capital to borrowed money, it doesn't indicate the returns on investment clearly.- Interest cover ratio is (also known as "times interest earned") is not focused on the shareholders' earnings, but on the company's ability to meet financial obligations.- **Inventory Turnover period ratio** highlights the efficiency of the production and sales process, but it's also not a direct indicator of investors' returns.## Step 2: Having gone through all the options, the Earnings per Share ratio is more helpful for shareholders assessing their investment returns because it literally shows the share of a company's profit (earnings) that is allocated to each outstanding share of its common stock.