Which of the Following Statements Is True About Earnings Per

question 104

Multiple Choice

Which of the following statements is true about earnings per share?

• A) It represents the profit available to the preferred shareholders.
• B) It evaluates the efficiency with which the company uses their assets to generate sales revenue.
• C) It is the only ratio required to be disclosed on the statement of earnings.
• D) It assesses the ability of the firm to pay their bills as they come due.

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Definitions:

Residual Value

Residual value is the estimated value of a fixed asset at the end of its useful life, reflecting what it can be sold for or its salvage value.

Financial Reporting

The process of producing statements that disclose an organization's financial status to management, investors, and government entities.

GAAP

Generally Accepted Accounting Principles (GAAP) are a set of rules and standards used in the United States for financial reporting, providing guidelines on how financial statements should be prepared and disclosed.

IRS

The Internal Revenue Service, a U.S. government agency responsible for tax collection and enforcement of tax laws.