If a Company's EPS and ROE Rise

question 36

Multiple Choice

If a company's EPS and ROE rise:

• A) it could mean that net income is rising or it could mean that the number of outstanding shares is falling. The first is sustainable; the second cannot be continued indefinitely.
• B) it means that the company is becoming more profitable and stockholders will see greater returns.
• C) it means that the company's tax liability will rise in the future and cause a decline in profitability.
• D) it could mean that net income is rising or it could mean that the number of outstanding shares is falling. In

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Definitions:

Economic Welfare

The overall well-being and standard of living of individuals and societies, often measured by factors such as income, health, and education.

Economies of Scale

Businesses enjoy cost savings resulting from their size of operations, wherein the cost per unit produced usually drops with greater scale.

Barriers to Entry

Obstacles that make it difficult for new competitors to enter a market, such as high startup costs, access to technology, and strict regulations.

Market Power

The ability of a firm or group of firms to influence or control prices or output in a particular market.