How is EPS computed? After-tax net income divided by
A)current common shares outstanding.
B)previous years common shares outstanding.
C)treasury shares outstanding.
D)average common shares outstanding.

Question

Quizplus · Accepted Answer

EPS is computed by dividing after-tax net income with average common shares outstanding during the period. This is because the average shares outstanding consider any changes in the number of shares during the period, such as stock dividends or stock splits. Using current or previous years' common shares outstanding would not accurately reflect the changes in the number of shares during the period. Treasury shares are shares of the company's own stock that have been repurchased and are not considered as outstanding shares, so using treasury shares outstanding would not provide an accurate representation of the number of shares available for earnings.

How Is EPS Computed? After-Tax Net Income Divided by