A company reported net income of $6 million.During the year the average number of common shares outstanding was 3 million.The price of a share of common stock at the end of the year was $5.There were 400,000 shares of preferred stock outstanding on average and no dividends were declared and the preferred stock is noncumulative.
-Use the information above to answer the following question.The EPS is approximately:
A) $0.40
B) $1.76.
C) $1.86.
D) $2.00.

Question

Quizplus · Accepted Answer

Since no dividends were declared on the noncumulative preferred stock, the entire net income of $6 million is available to common shareholders. EPS is calculated as net income divided by the average number of common shares outstanding: $6 million / 3 million shares = $2.00.

A Company Reported Net Income of $6 Million