To explain: The use of earnings per share information by the financial statement analysts.
Answer to Problem 20.1Q
Earnings per share is a measure which is useful in order to make ease of evaluation for all the investors before making investment to a particular company.
Explanation of Solution
Earnings per share:
EPS or Earnings per share measure the level of earnings that are finally payable to the investors or the shareholders of the company.
- An earnings per share is a measure which is used by various investors before investing to evaluate the price earnings ratios of stocks.
- It is considered as an important measure to help the investors to evaluate the company’s financial position overtime in which they have invested their funds.
- It can be calculated as earnings attributable to holders divided by the number of shares of a particular financial year. The formula for this same is given below:
Therefore, EPS is important for the shareholders to evaluate a company’s financial position in order to make appropriate investment decision.
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Chapter 20 Solutions
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