Which of the following are problems with expressing total returns to shareholders (TRS )in the traditional three-component format?
I.It does not distinguish the source of earnings growth.
II.It excludes return from moves in the overall market.
III.It does not account for the impact of financial leverage.
IV.It does not recognize that dividend yield can affect future earnings.
A)I and II only.
B)I,III,and IV only.
C)II,III,and IV only.
D)III and IV only.

Question

Quizplus · Accepted Answer

The traditional three-component format of TRS only considers the three components of earnings growth, dividends, and changes in market value, without distinguishing the source of earnings growth, accounting for the impact of financial leverage, or recognizing that dividend yield can affect future earnings. Therefore, options I, III, and IV are problems with expressing TRS in this format. Option II is not a problem as it is already included in the changes in market value component.

Which of the Following Are Problems with Expressing Total Returns