Q23RQ - Horngren'S Financial And Managerial Accounting

Question

What does earnings per share report, and how is it calculated?

Step-by-Step Solution

Answer

Earnings per share represent the profit earned by the company on per outstanding share basis calculated on quarterly or yearly intervals.

Earnings per share = (Net income - preferred dividends) / weighted average of common shares outstanding

Step 1: Introduction to topic

Earnings Per Shares is a financial ratio, which divides net earnings available to common stockholders by the weighted average outstanding shares over a specific period of time.

Step 2:Reporting and calculation of earning per share

Earnings per share represents the amount of net income or loss for each share of the corporation's outstanding common stock. It is calculated by considering net income reduce preferred dividends divide the value by the weighted average number of common shares outstanding.