Which Statement Concerning Earnings Per Share Is Incorrect

question 52

Multiple Choice

Which statement concerning earnings per share is incorrect?

• A) Earnings per share is regarded as one of the least important financial ratios.
• B) It represents a conversion of the absolute dollar amount of profit to a per share basis.
• C) If profits increase earnings per share could still decrease if share capital increases at a greater rate than profits.
• D) In calculating earnings per ordinary share, preference dividends are deducted from profit.

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Definitions:

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or within the normal operating cycle of the business.

Current Liabilities

Current liabilities are financial obligations a company is due to pay within one year, including accounts payable, short-term debts, and other similar liabilities.

Proportion

A segment, piece, or amount looked at in relation to the entirety.

Acid-test Ratio

A financial metric that measures a company's ability to pay off its current liabilities with its quick assets, providing insight into its short-term liquidity without relying on inventory assets.