Which of the following statements about earnings per share (EPS)is correct?
A)EPS is an indicator of how well a company will perform in the future.
B)Net income in dollar amount is a better measure to use in comparing different companies.
C)EPS can be used to compare companies of different sizes.
D)EPS is expected to remain constant over a period of time.

Question

Quizplus · Accepted Answer

EPS can be used to compare companies of different sizes as it is calculated by dividing a company's net income by the number of outstanding shares. This allows for a standardized comparison of companies regardless of their size. A and D are not correct as EPS is a measure of past performance, not a predictor of future performance, and EPS is not expected to remain constant as it can fluctuate based on changes in net income and outstanding shares. B is also incorrect as net income in dollar amount does not provide a standardized comparison and can be impacted by factors such as the size of the company and the industry it operates in.

Which of the Following Statements About Earnings Per Share (EPS)is