Question

The reason why maximizing share value and maximizing EPS do not give the same optimal capital structure is because ________. EPS maximization does not consider risk share value maximization does not consider risk EPS maximization considers cash flows EPS maximization does consider risk

Answer 1

The reason why maximizing share value and maximizing EPS do not give the same optimal capital structure is because EPS maximization does not consider risk.

To add, earnings per share (EPS) is the portion of a company's profit allocated to each outstanding share of common stock. Company’s profitability is indicated by its EPS.