Dividing earnings after taxes (which includes all profits distributed to both preferred stockholders and common stockholders) by common shares outstanding produces earnings per share.

Question

Quizplus · Accepted Answer

Earnings per share (EPS) is calculated by dividing the earnings available to common stockholders (after preferred dividends have been paid) by the number of common shares outstanding, not by including profits distributed to both preferred and common stockholders.

Dividing Earnings After Taxes (Which Includes All Profits Distributed to Both