Question

Basic eps represents the income earned by one share of multiple choice question.

a.preferred stock.
b.the total of common and preferred stock.
d.common stock.

Answer 1

Basic EPS (Earnings Per Share) measures the income earned on one share of common stock after preferred dividends are subtracted. It does not account for preferred stock earnings, as these are typically known fixed amounts. Therefore, the correct option is d. Common stock.

Step-by-step explanation:

The term basic EPS (Earnings Per Share) refers to the profit that a company makes for each outstanding share of common stock. EPS is an important financial metric used by investors to determine a company's profitability on a per-share basis. It is calculated by taking the net income of a company and subtracting any preferred dividends, then dividing the result by the average number of common shares outstanding during the period.

It is crucial to understand the distinction between common and preferred stock:

• Common stock represents ownership in a company, with voting rights and the potential for dividends that may vary.
• Preferred stock, on the other hand, typically carries no voting rights but has a higher claim on assets and earnings, which includes fixed dividends.

Since basic EPS specifically relates to the earnings available to common shareholders, the correct option in this case is:

d. Common stock.

Preferred stock is not part of the basic EPS calculation, as those dividends are subtracted from net income. The EPS for preferred stock is not typically calculated because preferred dividends are fixed and known in advance. In conclusion, basic EPS prominently represents the income earned by one share of common stock.

Answer 2

Basic EPS represents the income earned by one share of common stock, focusing on the profitability available to common shareholders after preferred dividends are subtracted. It is a key financial indicator for investors to determine the per-share earning power of a company's common stock.

Step-by-step explanation:

Basic Earnings Per Share (EPS) represents the income earned by one share of common stock. It is a financial metric that investors use to assess the profitability of a company on a per-share basis, and it excludes any potential impact from convertible preferred stock, debt, or warrants. The calculation involves taking the net income of a company, subtracting the dividends on preferred stock (if applicable), and dividing this adjusted income by the weighted-average number of common shares outstanding during the period.

To determine Basic EPS, preferred dividends are subtracted because EPS is focused solely on common stock; preferred shares have their own separate earnings calculations and dividends. Therefore, Basic EPS does not include the income earned by shares of preferred stock or the total of common and preferred stock; it specifically pertains to common stock.