Which of the Following Statements Is True

question 26

Multiple Choice

Which of the following statements is true?

• A)Earnings per share is an internal measure and is not used by stockholders.
• B)The denominator used in computing earnings per share represents the shares of common stock outstanding on the last day of the accounting period.
• C)Net income is not adjusted when computing earnings per share.
• D)By comparing earnings per share of a single corporation over time, a stockholder can evaluate the corporation's relative earnings performance.

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Definitions:

Cash Dividend

A payment made by a company out of its earnings to shareholders, usually in the form of cash.

Liquidating Dividend

A type of dividend paid by a company to its shareholders out of its capital base, essentially returning a portion of the capital initially invested back to the shareholders.

Earnings Per Share

A metric for assessing a company's earnings, determined by dividing its net income by the total outstanding common stock shares.

Preferred Stock

A class of ownership in a corporation with a higher claim on assets and earnings than common stock, usually with fixed dividends.