Which of the following combines the concepts of accounting income and corporate finance to measure whether the company's operations have increased stockholder wealth?
A) Gross profit margin
B) Earnings per share
C) Economic value added
D) Price/earnings ratio

Question

Quizplus · Accepted Answer

Economic value added (EVA) combines the concepts of accounting income and corporate finance to measure whether the company's operations have increased stockholder wealth. It is calculated by subtracting the cost of capital from the net operating profit after tax (NOPAT). A positive EVA indicates that the company has created value for its shareholders. Gross profit margin (A) is a measure of profitability, earnings per share (B) is a calculation of how much of a company's profit is allocated to each share of stock, and price/earnings ratio (D) measures the price of a company's stock relative to its earnings per share. None of these metrics directly measure the increase in stockholder wealth from a company's operations.

Which of the Following Combines the Concepts of Accounting Income