Which of the ratios listed helps to indicate the profitability from the shareholders’ view? a. Interest coverage ratio b. Debtors turnover c. Price-earnings ratio d. Debt-to-equity
Question
Which of the ratios listed helps to indicate the profitability from the shareholders’ view?
a. Interest coverage ratio
b. Debtors turnover
c. Price-earnings ratio
d. Debt-to-equity
Solution
The ratio that helps to indicate the profitability from the shareholders' view is the Price-earnings ratio (c). This ratio is used by investors and analysts to determine the relative value of a company's shares in an apples-to-apples comparison. It can also be used to compare a company with its own historical record or to compare aggregate markets against one another or over time.
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