Why Does the Numerator of the Basic EPS Formula Subtract

question 21

Essay

Why does the numerator of the basic EPS formula subtract the amount of preferred dividends for some preferred shares and not for others?

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Definitions:

Total Cost

The complete cost of production that includes both fixed and variable costs.

Profit

The financial gain obtained when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes associated with the activity.

Average Total Cost

Average Total Cost is an economic concept that represents the total cost of production divided by the quantity of output produced, encompassing both fixed and variable costs.

Output

The total amount of goods or services produced by a firm, industry, or economy in a given period.