Why is Earnings Per Share (EPS) considered important for investors?
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Solution and Explanation
EPS is important for investors because:
It indicates the company’s profitability on a per-share basis.
Helps investors compare profitability across companies regardless of size.
Influences the market price of the stock; higher EPS often leads to higher stock prices.
Assists in assessing a company’s financial health and growth prospects.
Thus, EPS provides investors with a clear and standardized measure of company performance, aiding in informed investment decisions.
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