When would basic EPS not be negative?
A)When there is a net loss for the year.
B)When the preferred dividends are less than net income for the year.
C)When the preferred dividends are more than net income for the year.
D)When the preferred dividends are more than net loss for the year.

Question

Quizplus · Accepted Answer

Basic EPS would not be negative if the preferred dividends are less than net income for the year. This means that the company has generated enough profits to cover its obligations to preferred shareholders and still has a positive earnings per share for common shareholders. If there is a net loss for the year (choice A) or preferred dividends are more than net income for the year (choice C and D), then basic EPS would be negative.

When Would Basic EPS Not Be Negative