The Basic EPS represents which of the following?
I. The net income divided by number of shares outstanding.
II. The amount of net income available for distribution to common stock holders, per share.
III. The net income after preferred dividends, expressed per common share.
IV. Net income after preferred dividends divided by total equity.
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A. B. C. D.Explanation
For a simple capital structure, Basic EPS = (Net Income - Preferred dividends)/weighted # of common shares = The amount of net income available for distribution to common stock holders, per share. Net income after preferred dividends divided by total equity is not true since total equity includes preferred equity whereas the denominator of Basic EPS consists only of common shares.