CFA Practice Question

There are 534 practice questions for this study session.

CFA Practice Question

To determine the earnings per share, ______ should be divided by the average number of common shares outstanding?

A. net income + interest expense
B. net income - preferred dividends
C. current market price of the stock
Correct Answer: B

Earnings per share = (net income - preferred dividends)/average number of common shares outstanding. Earnings per share is a measure of profitability and shows the amount of net income (net income - preferred dividends) applicable to each common share.

User Contributed Comments 1

User Comment
poomie83 It cannot be A because the denominator would need to include the shares from convertible bonds.

Also interest expense should be the after tax amount
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