The formula for computing earnings per share of common stock is
A)(net income + interest expense)/ average total assets.
B)net income/net sales.
C)(net income - preferred dividends)/ average common stockholders' equity.
D)(net income - preferred dividends)/ number of shares of outstanding common stock.

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 outstanding common stock. This formula gives investors an idea of the company's profitability on a per-share basis, allowing for easier comparison across companies.

The Formula for Computing Earnings Per Share of Common Stock