Question

55. Choose a sentence which speaks inappropriately about earning per share (EPS)
(A) It indicates the net profit earned per share
(B) It influences dividend policy of the firm
(C) It does not influence the share holding pattern of the company
(D) It does not influence the market price of the share​

Answer 1

Explanation:

1) Earnings per share: Net Income after Tax/Total Number of Outstanding Shares

2) Weighted earnings per share: (Net Income after Tax - Total Dividends)/Total Number of Outstanding Shares

A more diluted version of the ratio also includes convertible shares as well as warrants under outstanding shares. It is considered to be a more expanded version of the basic earnings per share ratio.

For an investor who is primarily interested in a steady source of income, the EPS ratio can tell him/her the room a company has for increasing its existing dividend. Although, EPS is very important and crucial tool for investors, it should not be looked at in isolation. EPS of a company should always be considered in relation to other companies in order to make a more informed and prudent investment decision.

Dividend Yield

Definition: Dividend yield is the financial ratio that measures the quantum of cash dividends paid out to shareholders relative to t...

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