Investigation the Effect of Financial Ratios, Operating Cash Flows and Firm Size on Earnings Per Share: Evidence from the Tehran Stock Exchange

ABSTRACT: Financial ratios not only are used to understand the current and past performance and future prediction of company, but also they are used as a tool for planning and controlling the activities of the company. Therefore, the main objective of this study is to investigate the effect of financial ratios, operating cash flows and firm size on earnings per share of listed companies in Tehran Stock Exchange. To test the research hypotheses, the financial data of 140 companies listed in Tehran stock exchange during the time span 2006-2010 has been used. In the present study, the ratios of profitability, liquidity, leverage, activity and market value to book value and also operating cash flows and firm size are used as independent variables and the earnings per share is used as the dependent variable. The results indicate that there is a positive and significant relationship between financial ratios and firm size with earnings per share. But a significant relationship between the ratio of operating cash flows and earnings per share has not been observed.