The profit or loss that is used in the calculation of basic earnings per share is calculated as:
A) Profit before tax expense
B) Profit before tax expense - tax expense
C) Profit before tax expense - tax expense - ordinary dividends
D) Profit before tax expense - tax expense - preference dividends

Question

Quizplus · Accepted Answer

The profit or loss used in the calculation of basic earnings per share (EPS) is the net income available to common shareholders, which is calculated as profit before tax expense minus tax expense and preference dividends. Ordinary dividends are not subtracted in this calculation because EPS is concerned with the earnings available to common shareholders before the distribution of those earnings.

The Profit or Loss That Is Used in the Calculation