Hello this is a simple straight-forward question without arithemetic involved, p

Question

Hello this is a simple straight-forward question without arithemetic involved, please answer (yes or no) and why:

1.) Is a business with a net income of $596 million and a quarterly EPS of $0.69 profitable for its owners? Please answer yes or no and why based on these numbers only, no calculations. Explain.

2.) Is a business with a net income of $596 million and a annual EPS of $1.25 profitable for its owners? Please answer yes or no and why based on these numbers only, no calculations. Explain.

Thank you!

Explanation / Answer

The answer should be yes for both 1 and 2, because the business, in either case, is generating a positive net income, which in turn gets translated into a positive earnings per share for the owners. From that point of view, both businesses are profitable. But if one is to comment as to which business is more profitable, obviously Business 1, with the same net income, is more profitable as compared to business 2 because the annual EPS for business 2 is ( 0.69 x 4) = $ 2.76. This is simply because, Business 1 has a smaller equity base or a smaller number of shares. Therefore the ROE for business 1 is higher as compared to Business 2.

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