Question

Which is the only ratio required to be reported on the face of a company’s financial statements? What are the two ways the ratio is required to be reported?

a) Current ratio; Reported as a percentage and a decimal
b) Debt-to-equity ratio; Reported as a percentage and a fraction
c) Earnings per share (EPS); Reported as a fraction and a percentage
d) Return on assets (ROA); Reported as a decimal and a fraction

Answer 1

The only ratio that must be reported on the face of a company's financial statements is Earnings per Share (EPS). It is reported both as a basic EPS, which uses the weighted average number of common shares, and as a diluted EPS, which includes the impact of all potential common shares that could arise from securities being converted into common stock.

Step-by-step explanation:

The only ratio that is required to be reported on the face of a company’s financial statements is the Earnings per Share (EPS). This ratio must be reported in two ways on the financial statements: as a basic EPS figure and as a diluted EPS figure. The basic EPS is calculated by dividing the net income by the weighted average number of common shares outstanding during the period. On the other hand, diluted EPS includes the potential impact of securities that could potentially be converted into common stock, such as options and convertible bonds, thus it reflects what the EPS would be if all these securities were converted to common stock.

Ratios such as the current ratio, debt-to-equity ratio, and return on assets (ROA) may be calculated and used in financial analysis, but they are not required to be presented in the financial statements themselves.