Final answer:
The ratio indicating how stocks are valued by investors is the Price/Earnings (P/E) ratio, which is not one of the provided options. Hence, the correct choice is E) None of the above.
Step-by-step explanation:
The ratio that shows how investors value the stock is Price/Earnings (P/E) ratio. This is not explicitly listed in the options provided, so the answer would be E) None of the above. The P/E ratio reflects what the market is willing to pay for a company's earnings. It is calculated by dividing the market value per share by the earnings per share (EPS). For example, if a company's stock is trading at $100 per share and the EPS is $5, then the P/E ratio is 20. Investors use the P/E ratio to compare the value of stocks. If dividends and capital gains are low, investors may rely even more on the P/E ratio to make decisions, as table 17.2 indicates that the historical dividends have decreased since the 1990s.
While the return on equity and return on assets are important metrics for gauging a firm's profitability and the efficiency in using equity or assets to generate profits, they do not directly express how the stock is valued by investors. Similarly, payout ratio and earnings per share are important but they are more indicative of a company's dividend policy and profitability, not directly a measure of investor valuation of the stock.