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

Question

Quizplus · Accepted Answer

Current earnings can predict future dividends and stock prices.If a company generates increased earnings in the current year,it will be able to pay higher dividends in future years.In other words,current EPS influences expectations about future dividends,which investors factor into the current stock price.

Which One of the Following Statements About Earnings Per Share