Which of the Following Statements Is True About Earnings Per

question 127

Multiple Choice

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

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

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Definitions:

Fixed Costs

Charges that persist unchanged with fluctuations in production or sales activities, such as leasing costs, employee salaries, and insurance fees.

Contribution Margin Technique

A method used in managerial accounting to analyze the profitability of products, segments, or services by calculating revenues minus variable costs.

Depreciation

The systematic allocation of the depreciated cost of an asset over its useful life.

Real Estate Taxes

Taxes levied on property by the local government, based on the assessed value of the property.