One firm may have a lower earnings per share simply because it has a
A)smaller dollar amount of common and preferred shares outstanding.
B)smaller number of common shares outstanding.
C)larger number of common shares outstanding.
D)smaller number of common and preferred shares outstanding.
E)larger number of common and preferred shares outstanding.

Question

Quizplus · Accepted Answer

Earnings per share is calculated by dividing the net income by the number of outstanding shares. Therefore, if a firm has a larger number of outstanding shares, the earnings per share will be lower. Conversely, if a firm has a smaller number of outstanding shares, the earnings per share will be higher. Therefore, choice C is correct.

One Firm May Have a Lower Earnings Per Share Simply