Which of the following statements is CORRECT?
A) Typically,a firm's DPS should exceed its EPS.
B) Typically,a firm's net income should exceed its EBIT.
C) If a firm is more profitable than average,we would normally expect to see its stock price exceed its book value per share.
D) If a firm is more profitable than most other firms,we would normally expect to see its book value per share exceed its stock price,especially after several years of high inflation.
E) The more depreciation a firm has in a given year,the higher its EPS,other things held constant.

Question

Quizplus · Accepted Answer

If a firm is more profitable than average, its stock price is expected to exceed its book value per share due to market expectations and demand for the stock. The other statements are incorrect. A firm's DPS may or may not exceed its EPS depending on its dividend policy. A firm's net income is expected to be lower than its EBIT due to interest and tax payments. The relationship between a firm's profitability and its stock price and book value per share is not clearly defined and depends on various factors such as market conditions and investor expectations. The amount of depreciation does not necessarily affect a firm's EPS as it is a non-cash expense.

Which of the Following Statements Is CORRECT