Earnings per share
A)will increase if net income increases and number of shares remains constant.
B)will increase if net income decreases and number of shares remains constant.
C)is number of shares divided by net income.
D)is the amount of money that goes into retained earnings on a per share basis.
E)None of the above.

Question

Quizplus · Accepted Answer

Earnings per share is the portion of a company's profit that is allocated to each outstanding share of common stock. Therefore, if the net income increases and the number of shares remains constant, the earnings per share will increase. Option B is incorrect because earnings per share will decrease if net income decreases. Option C is incorrect because earnings per share is net income divided by number of shares, not the other way around. Option D is incorrect because retained earnings are profits that are not distributed as dividends and are not relevant to earnings per share.

Earnings Per Share