Which of the following statements is most correct?

A) If two companies have the same ROE and the same risk they must have the same residual income (abnormal earnings) for the year.

B) If two companies have the same net book value and the same residual income this year, then their stock prices must be the same.

C) If two companies have the same ROE and the same stock price their earnings must be the same for the year.

D) If two companies have the same ROE, net book value, and cost of capital then their residual income must be the same for the year.

Answer rating: 100% (QA)

The return on equity is used to calculate an organizations profitability which is calculated by divi... View the full answer