What is the main failing of examining earnings per share growth as an indicator of success?
A) It does not take account of the investment needed and risk taken to generate that growth.
B) It inevitably leads to long- termism.
C) It ignores the levels of cash flow and profit.
D) It exaggerates the importance of the investment needed to generate that growth.

Question

Quizplus · Accepted Answer

EPS growth is often used as an indicator of success or profitability, but it only considers the growth in earnings rather than the amount of investment or risk taken to generate that growth. Therefore, it does not provide a complete picture of the company's financial health. This can lead to misleading results, as a company may have high EPS growth but it may be unsustainable or achieved through a high-risk strategy. Thus, it is essential to consider other factors such as cash flow and profit while assessing a company's financial performance.

What Is the Main Failing of Examining Earnings Per Share