Which of the Following Could Not Explain Why a Company

question 52

Multiple Choice

Which of the following could not explain why a company has a lower quality of income ratio but a higher EPS than one of its competitors?

• A)The company sells a higher percent of goods on credit.
• B)The company has fewer shares of outstanding common shares relative to its net income.
• C)The company earns a higher percent of net income from non-operating activities.
• D)The company pays a higher dividend.

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Definitions:

Semi-annually

Occurring twice a year.

Effective Annual Yield

Annualized interest rate on a security computed using compound interest techniques.

Yield Curve

A graph that shows the relationship between the interest rates and the maturity dates of debt securities issued by the same issuer.

Liquidity Premiums

Additional yield that investors require to hold securities with lower liquidity, compensating them for the higher cost and difficulty of trading such securities.