ABC declared and paid cash dividends to its common shareholders in January of the current year. The dividend:
A) Will be added to the numerator of the earnings per share fraction for the current year.
B) Will be added to the denominator of the earnings per share fraction for the current year.
C) Will be subtracted from the numerator of the earnings per share fraction for the current year.
D) Has no effect on the earnings per share for the coming year.

Question

Quizplus · Accepted Answer

Dividends do not affect the calculation of earnings per share (EPS). EPS is calculated by dividing the net income (less preferred dividends) by the average outstanding shares. Dividends paid to common shareholders do not impact this calculation.

ABC Declared and Paid Cash Dividends to Its Common Shareholders