CH 16. - Earnings Per Share

Question 1

Publicly held companies are required to report earnings per share (EPS) for three income statement items ________.

Answer 1

1) income from continuing operations
2) income from discontinued operations
3) net income.

Question 2

Basic earnings per share (EPS) for common stock equals

Answer 2

Net Income - Preferred Stock Dividends / Weighted Average Number of Shares Outstanding

Question 3

When a company issues stock through a stock split or a stock dividend, all _________ go to existing shareholders. The ___________ are treated as if they had always been outstanding and are included at the full amount for the entire year.

Answer 3

new shares

Question 4

___________ adjusts the basic EPS formula by considering the conversion effects of potentially dilutive securities (eg, convertible bonds).

Answer 4

Diluted earnings per share (EPS)

Question 5

_____________ must be adjusted for stock changes during the year.

Answer 5

Weighted average shares

Question 6

__________ adjusts the basic EPS formula by considering the conversion effects of all potentially dilutive securities

Answer 6

Diluted earnings per share (EPS)

Question 7

The _____________ must be adjusted for stock changes (eg, shares issued, treasury stock, splits) during the year.

Answer 7

weighted average of the number of common shares outstanding

Question 8

____________ is an estimate of the amount of income generated by one share of common stock.

Answer 8

Earnings per share