Earnings Per Share Disclosed by Reporting Entities Have Limitations Because

question 1

Multiple Choice

Earnings per share disclosed by reporting entities have limitations because of the:
I - Different accounting methods that can be used in the determination of profit.
II - Different amounts of profit depending on the size of the entity.
III - Ability of an entity to change the number of shares used in the denominator.
IV - Different numbers of shareholders depending on the size of the entity.

• A) I and IV.
• B) II and III.
• C) II and IV.
• D) I and III.

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Definitions:

Specific Identification

An inventory valuation method where individual costs are assigned to specific goods or inventory items, useful for tracking high-cost or unique items.

Average Costing

A method of inventory valuation where the cost of goods sold and ending inventory values are determined by averaging the cost of all similar items in the inventory.

Treasury Stock

Shares that were issued and subsequently reacquired by the issuing company, reducing the number of outstanding shares.

Earnings Per Share

Earnings Per Share (EPS) is a measure of a company's profitability, calculated as net income divided by the number of outstanding shares.