In Computing Earnings Per Share for a Simple Capital Structure

question 119

Multiple Choice

In computing earnings per share for a simple capital structure, if the preferred stock is cumulative, the amount that should be deducted as an adjustment to the numerator (earnings) is the

• A) preferred dividends in arrears.
• B) preferred dividends in arrears times (one minus the income tax rate).
• C) annual preferred dividend times (one minus the income tax rate).
• D) None of these answers are correct.

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