Which financial ratio is considered a primary indicator of corporate success?

Earnings per share (EPS) is a vital financial ratio that serves as a primary indicator of corporate success because it reflects the profitability of a company on a per-share basis. It is calculated by dividing net income by the number of outstanding shares. A higher EPS indicates that a company is generating more profit for each share owned, which is attractive to investors and generally associated with strong financial performance.

Investors frequently use EPS to assess a company's profitability, as it provides a straightforward measure of how much money a shareholder would earn for each share owned if the company distributed all its earnings. Furthermore, improving EPS can lead to increased stock prices and dividends, thereby reinforcing investor confidence and identifying an organization's long-term growth potential.

While the price/earnings ratio, return on assets, and debt ratio are also important metrics that provide insights into different aspects of financial health and operational efficiency, EPS more directly correlates to the profit generated for shareholders, making it a more immediate indicator of corporate success.