Q1. Refer to the EPS information immediately above. Even though Wagdy Company reports (__________ / lower) EPS, both companies have (__________ / different) net income. A company with greater EPS (does / _________) indicates greater profitability.
Q2. If Athar Company buys back 1 million shares of common stock, then treasury stock would (__________/ decrease), common shares outstanding would (increase / __________), and EPS would (__________/ decrease) to ($0.33 / ___ / $2) per share. The increase in EPS looks (__________/ bad) to shareholders because their proportionate ownership interest is (__________/ decreased).`
Alternatively, if Athar Company issues an additional 1 million shares of common stock then common shares outstanding would (__________/ decrease) and EPS would (increase / decrease) to (__________/ $1 / $2) per share. The decrease in EPS looks (good / __________) to shareholders because their proportionate ownership interest is (increased / __________).
Q3. Refer to the EPS information immediately above. EPS for Athar Company has a/an (__________ / decreasing) trend, whereas Wagdy Company has a/an (increasing / __________) trend. EPS (__________ / cannot) be more meaningful when compared over time.
Q4. Refer to the EPS and the Market Price information immediately above. The PE Ratio measures how expensive a stock is; how much investors are willing to pay for each $1 of EPS. A PE below 10 is considered a “bargain” stock, whereas a PE of more than 20 is considered “expensive.” Measured by the PE ratio, Athar Company stock is (a bargain / __________ / expensive), while Wagdy Company stock is (a bargain / moderately-priced / __________). EPS (__________ / cannot) be more meaningful when compared to market price per share.