Which two metrics are used as short-term performance measures to gauge shareholder wealth?

Which two metrics are used as short-term performance measures to gauge shareholder wealth?

• A. ROCE and RONA
• B. ROCE and EPS
• C. EPS and RONA
• D. ROCE and profit

Answer: (B)

Focus on what directly ties profitability to shareholder value in the near term. Return on capital employed shows how efficiently the company is turning invested capital into profit, giving a sense of value creation in the short run. Earnings per share translates that profitability into a per-share figure, which is the clearest measure shareholders look at to gauge immediate wealth effects, since it relates to dividends and potential share price movements. Together, these two metrics cover both how well the business uses its capital and the per-share benefit received by owners, making them the best pair for short-term shareholder wealth assessment. The other metrics either miss the per-share perspective or emphasize asset efficiency or total profit without linking it to shareholder value per share.

Focus on what directly ties profitability to shareholder value in the near term. Return on capital employed shows how efficiently the company is turning invested capital into profit, giving a sense of value creation in the short run. Earnings per share translates that profitability into a per-share figure, which is the clearest measure shareholders look at to gauge immediate wealth effects, since it relates to dividends and potential share price movements. Together, these two metrics cover both how well the business uses its capital and the per-share benefit received by owners, making them the best pair for short-term shareholder wealth assessment. The other metrics either miss the per-share perspective or emphasize asset efficiency or total profit without linking it to shareholder value per share.