What is earnings per share?
A) net income divided by weighted average number of preferred shares outstanding
B) net income divided by weighted average number of common shares outstanding
C) net income plus the weighted average number of common and preferred shares outstanding
D) net income plus the weighted average number of bonds outstanding

Question

Quizplus · Accepted Answer

Earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding during a period. It helps in determining the profitability of a company on a per-share basis. Choice A is incorrect as it considers the preferred shares, which are not always available for calculation of earnings per share. Choice C is incorrect, as it includes the number of shares along with net income, which is not the correct formula. Choice D is incorrect, as bonds do not impact the earnings per share calculation.

What Is Earnings Per Share