Which of the following is the formula to compute earnings per share of common stock?
A) The formula is (Net income + interest expense)/Average total assets.
B) The formula is Net income/Net sales.
C) The formula is (Net income - preferred dividends)/Number of shares of common stock outstanding.
D) The formula is (Net income - preferred dividends)/Average common stockholders' equity.

Question

Quizplus · Accepted Answer

The correct formula for computing earnings per share (EPS) of common stock is (Net income - preferred dividends)/Number of shares of common stock outstanding. This formula calculates the amount of profit that is allocated to each share of common stock, after accounting for any dividends that are required to be paid to preferred shareholders.

Which of the Following Is the Formula to Compute Earnings