Which One of the Following Statements Regarding Earnings Per Share

question 32

Multiple Choice

Which one of the following statements regarding earnings per share (EPS) is true?

• A)The EPS ratio is important because it signals the ability of the company to pay future dividends,which investors factor into the stock price.
• B)Earnings per share is generally reported in the balance sheet under stockholders' equity.
• C)Earnings per share is the best way to compare the performance of different companies.
• D)EPS,in its basic form,is calculated by dividing net income by the average number of all shares issued.

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Definitions:

Variable Costs

These are costs that vary directly with the level of production or sales volume, such as raw materials and direct labor costs.

Fixed Costs

Costs that do not change with the level of goods or services produced within a certain range; such costs are incurred regardless of business activity levels.

Break-even Point

The point at which total income matches total costs, leading to a situation where there is no gain or deficit.

Variable Cost

Costs that vary directly with the level of production or the volume of services rendered, such as raw materials and direct labor.