Which statement is correct about earnings per share (EPS)?
A)A company's total earning is more meaningful than its EPS.
B)EPS represents the total amount of earnings of a company.
C)EPS represents an ordinary share's interest in the company.
D)The EPS is directly correlated with the company's stock price.

Question

Quizplus · Accepted Answer

EPS represents an ordinary share's interest in the company, which means it indicates the profit that is attributable to each ordinary share. A company's total earning may not be more meaningful than its EPS because total earnings do not provide information on how many shares are outstanding, whereas EPS takes this into account. EPS is not the same as the total amount of earnings of a company. The EPS can have an impact on a company's stock price, but it is not directly correlated with it as many other factors can affect stock prices.

Which Statement Is Correct About Earnings Per Share (EPS)