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To calculate Earnings per Share (EPS), a company gets net income related to common shares by Adding preferred dividends to net income, and then divide by shares of common stocks Deducting preferred dividends from net income, and then divide by shares of common stocks Deducting preferred dividends from gross profit, and then divide by shares of common stocks None of the above
To calculate Earnings per Share (EPS), a company gets net income related to common shares by
- Adding preferred dividends to net income, and then divide by shares of common stocks
- Deducting preferred dividends from net income, and then divide by shares of common stocks
- Deducting preferred dividends from gross profit, and then divide by shares of common stocks
- None of the above
Expert Solution
The answer is
Option (b) Deducting preferred dividends from net income, and then divide by shares of common stocks
Why?
Earning per share (EPS) is the balance part of profit allocated to each common shareholders
The equation for the calculation of EPS for a company that has prefered shares outstanding is
= (Net income - Dividend to preference shares) / Average common shares outstanding
Hence option a,c,d are incorrect
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