Earnings per share is calculated by:
A) dividing profit or loss attributable to ordinary shareholders of a parent entity, by the number of ordinary shares the entity has on issue at the beginning of the reporting period
B) dividing profit or loss attributable to ordinary shareholders of a parent entity, by the weighted average number of ordinary shares the entity has on issue during the reporting period
C) dividing profit or loss attributable to preference shareholders of a parent entity, by the weighted average number of ordinary shares the entity has on issue during the reporting period
D) dividing profit or loss attributable to ordinary shareholders of a parent entity, by the number of ordinary shares the entity has on issue at the end of the reporting period

Question

Quizplus · Accepted Answer

Earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of a parent entity by the weighted average number of ordinary shares the entity has on issue during the reporting period. This is because the weighted average number of shares takes into account any changes in the number of shares outstanding during the period, which may affect the accuracy of the calculation if only the number of shares at the beginning or end of the period is used. Choice A and D are incorrect because they only use the number of shares at a specific point in time, which does not account for any changes during the period. Choice C is incorrect because it refers to preference shareholders, rather than ordinary shareholders.

Earnings Per Share Is Calculated By