How many of the following statements regarding earnings per share (EPS) is (are) true?
The EPS ratio is important because it signals the ability of the company to pay future dividends, which investors factor into the stock price.
Earnings per share is generally reported in the balance sheet under stockholders' equity.
Earnings per share is the best way to compare the performance of different companies.
EPS, in its basic form, is calculated by dividing net income by the average number of all shares issued.
A) One
B) Two
C) Three
D) Four

Question

How many of the following statements regarding earnings per share (EPS) is (are) true?
 The EPS ratio is important because it signals the ability of the company to pay future dividends, which investors factor into the stock price.
 Earnings per share is generally reported in the balance sheet under stockholders' equity.
 Earnings per share is the best way to compare the performance of different companies.
 EPS, in its basic form, is calculated by dividing net income by the average number of all shares issued.
A) One
B) Two
C) Three
D) Four

Quizplus · Accepted Answer

The first statement is true as EPS is an indicator of a company's profitability and potential to pay dividends. The second statement is false because EPS is reported on the income statement, not the balance sheet. The third statement is false as EPS alone doesn't account for company size or industry differences. The fourth statement is false because EPS is calculated using the average number of outstanding shares, not all shares issued.

How Many of the Following Statements Regarding Earnings Per Share