Which of the Following Statements Is True of Earnings Per

question 31

Multiple Choice

Which of the following statements is true of earnings per share?

• A)A company must pay tax on the earnings per share.
• B)Earnings per share can be maximized by changing from corporation to proprietorship form of organization.
• C)A company can maximize its value by maximizing earnings per share.
• D)Earnings per share is often used as an indication of the firm's potential for generating future cash flows.
• E)A high earnings per share in the current period results in lower future risk position of the business.

---

Definitions:

Equilibrium Quantity

The quantity of goods or services supplied is exactly equal to the quantity demanded at the market price.

Equilibrium Price

The cost where the supply of goods meets the demand for those goods.

Tax Revenues

The funds collected by governments through the process of levying taxes.

Point Elasticity

The measure of how much the quantity demanded of a good responds to a change in price at a specific point on the demand curve.