Preferred dividends are subtracted from net income but not income before extraordinary items in computing earnings per share.

Question

Quizplus · Accepted Answer

Preferred dividends are subtracted from net income in computing earnings per share (EPS), but this adjustment is made before calculating both basic EPS and diluted EPS, which are based on net income available to common shareholders. This means preferred dividends are subtracted from net income, affecting the calculation of EPS regardless of the classification of income items.

Preferred Dividends Are Subtracted from Net Income but Not Income