Question

Earnings per share equals the: A. Total number of shares of preferred stock divided by earnings. B. Total number of shares of common stock divided by earnings. C. Total earnings divided by number of shares of preferred stock. D. Total earnings divided by number of shares of common and preferred stock. E. None of these are correct.

Answer 1

In this context, None of the given options is the formula to derive the earnings per share.

The Earnings per share refers to the portion of a firm's profit allocated to each outstanding share of common stock.  

• The formula for deriving EPS in a company with preferred & common stock is [[Net income - Preferred dividends) / Average outstanding common shares}

Therefore, the Option E is correct.

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