If a company's EPS and ROE rise:
A) it could mean that net income is rising or it could mean that the number of outstanding shares is falling. The first is sustainable; the second cannot be continued indefinitely.
B) it means that the company is becoming more profitable and stockholders will see greater returns.
C) it means that the company's tax liability will rise in the future and cause a decline in profitability.
D) it could mean that net income is rising or it could mean that the number of outstanding shares is falling. In

Question

Quizplus · Accepted Answer

An increase in EPS can result from either rising net income or a reduction in the number of outstanding shares. While rising net income is sustainable, reducing shares is not indefinitely sustainable.

If a Company's EPS and ROE Rise