11.4 Learning Objective 11-4
1) If a company reports both basic and diluted EPS, diluted EPS will always be equal or lower than basic EPS.
2) Earnings per share shows how much income a company earned for each share of stock.
3) The income statement and the statement of cash flows often paint the same picture of the company.
4) Earnings per share is calculated:
A) only for preferred stock.
B) only for common stock.
C) for common and preferred stock.
D) only for treasury stock.
5) The ratio that uses weighted-average number of shares of common stock outstanding in the denominator is the:
A) earnings per share.
B) gross profit percentage.
C) leverage ratio.
D) current ratio.
6) Earnings per share (EPS) is calculated as:
A) net income divided by the number of shares of common stock issued at the end of the year.
B) net income divided by the number of shares of common stock outstanding at the end of the year.
C) net income divided by the average number of shares of common stock outstanding throughout the year.
D) net income divided by the average number of shares of common stock issued throughout the year.
7) When calculating earnings per share, preferred dividends are:
A) added to net income in the numerator of the EPS calculation.
B) added to common shares in the denominator of the EPS calculation.
C) subtracted from common shares in the denominator of the EPS calculation.
D) subtracted from net income in the numerator of the EPS calculation.
8) A company is required to report both basic and diluted earnings per share when the:
A) company's capital structure includes convertible preferred stock.
B) company has extraordinary gains and losses.
C) company has discontinued operations.
D) company reports both net income and comprehensive income.
9) Wendell Corporation reported net income for the current year of $800,000. Wendell had 5,000 shares of $100 par value, 10% preferred stock outstanding and 40,000 shares of $1 par value common stock outstanding for the entire year. Earnings per share is:
A) $16.67.
B) $17.77.
C) $18.75.
D) $20.00.
10) Padowski Corporation's net income for the current year is $500,000. At year end, the corporation had outstanding 4,500 shares of 15%, $100 par value nonconvertible preferred stock and 15,000 shares of $10 par value common stock. No shares were issued or retired during the year. What is basic earnings per share?
A) $22.18
B) $25.64
C) $28.83
D) $33.33