Earnings per share of common stock will immediately increase as a result of:
A) the sale of additional shares of common stock by the company.
B) an increase in the dividends paid to common stockholders by the company.
C) an increase in the company's net income.
D) the issuance of bonds by the company to finance construction of new buildings.

Question

Quizplus · Accepted Answer

Earnings per share of common stock will increase as a result of an increase in the company's net income. This means the company is generating more profit, which can be distributed among the shareholders, thereby increasing the earnings per share.

Note: A, B, and D options do not contribute to an immediate increase in earnings per share. Selling additional shares of common stock or issuing bonds would dilute the existing shares, thus reducing the earnings per share. An increase in dividends paid to common stockholders would not directly increase the earnings per share, but it may attract more investors to buy shares, resulting in an increase in the earnings per share in the long run.

Earnings Per Share of Common Stock Will Immediately Increase as a Result