Which of the following statements about earnings per share (EPS) is correct?
A)Increased net income would cause earnings per share to decrease.
B)Issuance of more common shares would cause earnings per share to increase.
C)Purchasing treasury shares would cause earnings per share to decrease.
D)EPS is calculated using the number of common shares of stock outstanding.

Question

Quizplus · Accepted Answer

EPS is calculated by dividing net income by the number of shares of common stock outstanding. Therefore, the correct statement is that EPS is calculated using the number of common shares of stock outstanding. Increased net income would cause EPS to increase (not decrease), and issuance of more common shares would cause EPS to decrease (not increase). Purchasing treasury shares would have no impact on net income and may actually increase EPS if the number of outstanding shares decreases.

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