CFA Practice Question

There are 201 practice questions for this study session.

CFA Practice Question

Normalized EPS is calculated to remove
A. cyclical effects.
B. non-recurring components of earnings.
C. differences in accounting methods.
Explanation: It is the estimated level of EPS that the business could be expected to achieve under mid-cyclical conditions.

User Contributed Comments 5

User Comment
REITboy Don't normalized earnings also remove nonrecurring items?
REITboy I guess not, according to the book... but they should... grumble...
ryanwalker You remove nonrecurring items to get normalized EPS. The normalized EPS themselves remove the cyclical effects of EPS.
LoCo83 Agreed. Would think that management compensation in excess of market norms or one time natural disaster effects would be 'normalized' out, even though it wouldn't show as cyclical
b25331 EPS is after the removal of non-recurring items and the smoothing of EPS for business cycle effects and cyclicality, i.e. normalized EPS, is done either through historical average EPS method or average ROE method.
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