When a Corporation Has Outstanding Both Common and Preferred Stock

question 20

Multiple Choice

When a corporation has outstanding both common and preferred stock:

• A) Basic and diluted earnings per share are reported only if the preferred stock is cumulative.
• B) Earnings per share are reported for each type of stock outstanding.
• C) Earnings per share are computed without regard to the amount of dividends declared on preferred stock.
• D) Earnings per share are computed without regard to the amount of dividends declared on common stock.

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Definitions:

Stock Owners

Individuals or entities that hold shares of stock in a corporation, representing partial ownership of that corporation.

Par Preferred Stock

Preferred shares of a company's stock with a fixed face value that typically determines dividend payments.

Par Common Stock

This is a classification of common stock that has a nominal value assigned in the corporate charter and is used in the accounting records.

Shares

Units of ownership in a company or financial asset.