What is the accounting relationship in which earnings per share minus dividends equal the change in book value per share called?
A) clean surplus relationship
B) economic value added relationship
C) accounting earnings identity
D) payout-retention identity
E) dividend valuation equation

Question

Quizplus · Accepted Answer

The accounting relationship in which earnings per share minus dividends equal the change in book value per share is called the clean surplus relationship. This relationship is based on the clean surplus accounting model, which assumes that changes in equity can be explained by changes in net income, dividends, and other comprehensive income, without any adjustments for transactions with shareholders. The clean surplus relationship is important for understanding the link between earnings, dividends, and equity valuation, and for evaluating the quality of earnings and the sustainability of dividends.

What Is the Accounting Relationship in Which Earnings Per Share