Earnings per share tells the shareholder the amount of

Question

Quizplus · Accepted Answer

Earnings per share (EPS) is calculated by dividing the net income of a company by the number of outstanding shares of common stock. Option D is correct because it represents the income per share assuming that dividends on preferred stock were paid out. This is important because preferred stockholders usually receive fixed dividends, so it is necessary to calculate the earnings per share as if the dividends on preferred stock were paid out before calculating the amount available for the common stockholders. Options A, B, and C do not accurately represent earnings per share. Option E is incorrect because it assumes that both common and preferred stock dividends have been paid out, whereas EPS only considers common stock.

Earnings Per Share Tells the Shareholder the Amount of