Earnings per share is computed as

Question

Quizplus · Accepted Answer

Earnings per share (EPS) is calculated by dividing net income by total shares outstanding. EPS measures the amount of net income earned per share of common stock. Choice A is incorrect because it divides net income by total stockholders' equity instead of shares outstanding. Choice B is incorrect because it divides EBIT (earnings before interest and taxes) by total stockholders' equity instead of shares outstanding. Choice C is incorrect because it calculates earnings after taxes instead of net income. Choice D is incorrect because it divides retained earnings by shares outstanding instead of calculating the addition to retained earnings.

Earnings Per Share Is Computed as