Question

    What does the ratio obtained by dividing a company's net

    income by its number of shares outstanding signify ?
    A The company's market capitalization Correct Answer Incorrect Answer
    B The earnings per share of the company Correct Answer Incorrect Answer
    C The number of shares that are available for trading on the stock market Correct Answer Incorrect Answer
    D The book value per share of the company Correct Answer Incorrect Answer
    E The dividend yield of the company Correct Answer Incorrect Answer

    Solution

    The ratio obtained by dividing a company's net income by its number of shares outstanding is known as earnings per share (EPS). EPS is a financial ratio that is used to measure a company's profitability on a per-share basis. The EPS ratio indicates the amount of profit that can be attributed to each share of the company's stock. This means that the higher the EPS, the more profit a company is generating per share of its stock.

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