All else being equal,when the current stock price for a company's stock falls and net income falls:
A)EPS decreases and ROE increases.
B)EPS and ROE both decrease.
C)EPS increases and ROE decreases.
D)EPS and ROE both increase.

Question

Quizplus · Accepted Answer

When the current stock price for a company's stock falls and net income falls, the earnings per share (EPS) calculated as net income divided by the number of shares outstanding, will decrease. Additionally, the return on equity (ROE) calculated as net income divided by shareholder's equity will also usually decrease since net income has decreased but shareholder's equity has not decreased significantly. Therefore, both EPS and ROE will decrease when the current stock price for a company's stock falls and net income falls.

All Else Being Equal,when the Current Stock Price for a Company's