Extract
EPS as a measure of intercompany performance: Philippine evidence.
INTRODUCTION
International Accounting Standards (IAS) 1 states that the objective of financial reporting is to provide information that is useful to a wide range of users. Stice, Stice and Skousen (2007) explain that an investor uses this financial information in making credit and investment decisions. Investors gauge how well a company performs in comparison with other companies. Profitability is one of the basic indicators of the soundness of a business entity. However, it is not enough to know whether net income is increasing or decreasing. Investors are concerned with how income is changing relative to certain factors such as firm size. The analysis of the financial performance of a business becomes more meaningful when profit is scaled against acceptable measures of firm size such as total assets and sales. Ratios such as return on assets (ROA) and return on sales (ROS) are commonly used to evaluate the results of business operations. Another popular measure of income performance is Earnings per Share (EPS). It is a ratio which incorporates both net income and outstanding ordinary shares in the measurement of profit performance. In this tool, the number of ordinary shares is proposed as a measure of firm size. This financial ratio is very ...See the full content of this document
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