EPS Flashcards
(5 cards)
1
Q
EPS Looks Backward
A
EPS is based on historical profit. It shows how the company performed in the past, but gives no insight into future earnings or growth.
2
Q
One-Off Items Can Distort EPS
A
Unusual income or expenses (like asset sales or fines) can make EPS appear better or worse than usual. These don’t reflect normal business performance.
3
Q
Doesn’t Reflect Company Size or Strength
A
A small company might have a high EPS but still be less valuable or stable than a larger company with lower EPS.
4
Q
EPS Can Be Manipulated
A
- make up depreciation change depreciation or delay costs) to boost profit and improve EPS artificially.
5
Q
Ignores Cash Flow
A
EPS is profit-based and doesn’t show how much cash the company has. A firm can have good EPS but poor cash flow, which is risky.
