Learning Objective 11-1
1) Earnings per share equals ________.
A) retained earnings divided by dividends
B) net income divided by the weighted average shares of outstanding common stock
C) earnings divided by preferred shares outstanding
D) net income divided by average total assets
2) Wall Street analysts focus primarily on a company's ________.
A) return on assets
B) gross profit
C) dividends per share
D) earnings per share
3) Which financial statement is the best place to look to find earnings per share?
A) Income Statement
B) Statement of Changes in Shareholders' Equity
C) Balance Sheet
D) both the Income Statement and Balance Sheet
4) The most widely used indicator of a company's overall performance is ________.
A) return on equity
B) earnings per share
C) sales
D) gross profit
5) Analysts focus on "the number" which is the company's ________.
A) GDP
B) EPS
C) sales
D) interest rates
6) Earnings per share is ________.
A) net income, minus preferred dividends, divided by average shareholders' equity
B) total shareholders' equity divided by the average number of outstanding common shares
C) net income divided by the weighted average number of common shares outstanding
D) net income divided by sales
7) If a company's earnings are greater than financial analysts' forecasts ________.
A) the market price of the stock will probably increase
B) the market price of the stock will probably decrease
C) earnings per share will be lower than expected
D) the market price of the stock will probably not be affected
8) If a company's earnings do not meet financial analysts' forecasts ________.
A) the market price of the stock will probably increase
B) the market price of the stock will probably decrease
C) earnings per share will be higher than expected
D) the market price of the stock will probably not be affected
9) Investor's emphasis on earnings ________.
A) is good because it helps companies be more profitable
B) is good because even uneducated people can understand earnings
C) makes it unnecessary for investors to learn anything about accounting
D) can result in serious miscommunication between a company and its owners
10) Most investors focus primarily on a company's ________.
A) balance sheet
B) earnings per share
C) statement of cash flows
D) GDP