3-4 Earnings Per Share

Question 1

Earnings Per Share (EPS)

Answer 1

Relates the income of a company to a singe share of stock

Question 2

Earnings per Share equation

Answer 2

(Net Income - Preferred Dividends)/Weighted Average Common Shares Outstanding

Question 3

Why must net income be reduced by any preferred stock dividend claims?

Answer 3

Because dividends are not available to common stock owners

Question 4

If the income statement includes discontinued operations what is reported?

Answer 4

1. Per-share amounts from continuing operations
2. Income from discontinued operations
3. Gain or loss recognized on the business component
4. Net income

Question 5

Where are the per share amounts for the discontinued operations reported?

Answer 5

On the face of the income statement or in the notes accompanying the financial statements

Question 6

What is a consolidated income statement?

Answer 6

A parent company prepares financial statements where it combines its own activities with those of one or more additional companies (subsidiaries) in which it has a more than 50% but less than 100% ownership interest

Question 7

Noncontrolling interest

Answer 7

The interest (less than 50% ownership) in the subsidiaries NOT owned by the parent company