How can financial ratios be expressed?

Financial ratios can be expressed in various formats to convey different perspectives on the data they represent. The correct answer highlights three common ways to present financial ratios: as decimals, percentages, and multiples.

When expressed as decimals, financial ratios provide a straightforward numerical representation of the relationship between two values. For instance, a ratio of 0.5 indicates that the first value is half of the second.

Expressing ratios as percentages allows for easier interpretation for many users, especially when they are comparing data across different entities or time periods. For example, a return on equity of 0.15 can be presented as 15%, making it more relatable for stakeholders assessing investment returns.

Multiples are often used in valuation, particularly in comparisons among companies. For instance, the Price-to-Earnings (P/E) ratio is typically expressed as a multiple, such as 15x, which indicates that the stock price is 15 times the earnings per share.

This versatility in expression ensures that financial ratios can be understood and utilized effectively by users with varying levels of financial expertise and across different contexts. Thus, the option indicating the multiple formats (decimal, percentage, and multiple) correctly captures the breadth of how financial ratios can be communicated.