Final answer:
Performance ratios measure stockholders' returns and market valuation of a company's stock, including dividends and capital gains. Market performance is also gauged using indices like the Dow Jones Industrial Average, the S&P 500, and the Wilshire 5000.
Step-by-step explanation:
The ratios that measure returns to stockholders and the value the marketplace puts on a company's stock are known as performance ratios.
There are two main forms of return that investors expect when they purchase stock: dividends and capital gains. Dividends are direct payments a firm makes to its shareholders. On the other hand, capital gains occur when the value of the stock increases from the time it is bought to when it is sold, such as buying a stock at $45 and selling it later for $60, which would be a $15 gain.
To gauge a company's performance and the return on investment, investors also look at various stock market indices such as the Dow Jones Industrial Average, the Standard & Poor's 500, and the Wilshire 5000, which track stock prices of U.S. companies and provide insights into market trends and stock valuation.