Earnings per share of common stock will immediately increase as a result of:
A) the sale of additional shares of common stock by the company.
B) an increase in the dividends paid to common shareholders by the company.
C) an increase in the company's net income.
D) the issuance of bonds by the company to finance construction of new buildings.

Question

Quizplus · Accepted Answer

As earnings per share of common stock is calculated by dividing the net income available to common shareholders by the weighted average number of common shares outstanding, an increase in the company's net income will immediately increase the earnings per share. Options A and D do not have any direct impact on the earnings per share of common stock, and an increase in dividends paid to common shareholders (option B) may or may not increase the earnings per share depending on the impact of the dividend payment on the net income and the number of shares outstanding.

Earnings Per Share of Common Stock Will Immediately Increase as a Result