Which of the following is the reason that preferred dividends are deducted from net income in calculating earnings per share?
A)They are not paid from net income.
B)They are not a part of stockholders' equity.
C)They are paid to preferred stockholders, not common stockholders.
D)They are not paid until all common stockholders have received their dividends, so preferred dividends are not relevant in the formula and so must be taken out of the equation.

Question

Quizplus · Accepted Answer

Preferred dividends are paid to preferred stockholders, not common stockholders. As earnings per share is calculated only for common stockholders, preferred dividends are deducted from net income in order to arrive at the earnings available to common stockholders.

Which of the Following Is the Reason That Preferred Dividends