If a Company's Earnings Per Share and Return on Equity

question 49

Multiple Choice

If a company's earnings per share and return on equity both increase:

• 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 either case,stockholders can expect greater future returns indefinitely.

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Definitions:

Mafic Crystals

Minerals rich in magnesium and iron that crystallize from basaltic magmas, typically dark in color.

Pegmatite

An igneous rock with extremely large crystals, formed by the slow cooling of magma, often containing rare minerals.

Texture

The general physical appearance or character of a rock, especially the size, shape, and arrangement of minerals and other materials.

Viscosity

A measure of a material’s resistance to flow.