Which of the following could explain why a company has a lower net profit margin ratio but a higher EPS than one of its competitors?
A)The company sells a higher percentage of goods on credit.
B)The company has fewer shares of outstanding common stock relative to its net income.
C)The company earns a higher percentage of net income from non-operating activities.
D)The company pays a higher dividend.

Question

Quizplus · Accepted Answer

A lower net profit margin ratio indicates that the company has higher expenses relative to its revenue. However, if the company has fewer shares of outstanding common stock relative to its net income, then the EPS would be higher. This means that despite having lower net profit margin ratio, the company is able to generate higher earnings per share, which could be attractive to investors.

Which of the Following Could Explain Why a Company Has