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 shareholders 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 either case,shareholders can expect greater future returns indefinitely.

Question

Quizplus · Accepted Answer

EPS (Earnings Per Share) increases if net income rises or if the number of outstanding shares decreases. ROE (Return on Equity) increases with higher net income. Reducing shares can temporarily boost EPS but isn't sustainable for indefinite growth.

If a Company's EPS and ROE Rise