Asked by Hallie Adair on May 12, 2024
Verified
Basic earnings per share is computed as
A) Net Income / Total Number of Common Shares Outstanding
B) (Net Income - Preferred Dividends) / Total Number of Common Shares Outstanding
C) (Net Income - Preferred Dividends) / Weighted-Average Number of Common Shares Outstanding
D) Net Income / Weighted-Average Number of Common Shares Outstanding
Common Shares Outstanding
The total number of shares of a corporation's stock that are currently owned by investors, including those held by institutional investors and company officers.
Net Income
The total earnings of a company after deducting all expenses, including taxes and operating costs, from its total revenue.
Weighted-Average
A calculation that takes into consideration the varying degrees of importance of the numbers in a data set.
- Compute basic earnings per share.
Verified Answer
LH
Laura HuertaMay 17, 2024
Final Answer :
C
Explanation :
Basic earnings per share is calculated by dividing the net income minus preferred dividends by the weighted-average number of common shares outstanding during the period. This method takes into account any dilutive effects of potential common shares on the market. Therefore, option C is the correct choice for computing basic earnings per share.
Learning Objectives
- Compute basic earnings per share.