An EPS amount is always shown for:
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A. B. C. D.Explanation
All of these responses are true.
An EPS (Earnings Per Share) amount is a financial metric that measures the profitability of a company on a per-share basis. It is commonly used by investors and analysts to assess a company's performance and profitability.
The correct answer to the question is:
B. Income before extraordinary items and the cumulative effect of accounting changes.
Explanation:
EPS is typically calculated by dividing a company's net income by the weighted average number of outstanding shares. However, not all components of a company's income statement are included in the calculation of EPS.
EPS is primarily calculated using income from continuing operations, which represents the ongoing core business activities of the company. This is because income from continuing operations provides a more accurate representation of the company's sustainable profitability.
Extraordinary items, on the other hand, refer to significant events or transactions that are both unusual in nature and infrequent in occurrence. Examples of extraordinary items may include gains or losses from the sale of assets, natural disasters, or legal settlements. These items are excluded from the calculation of EPS because they are considered to be non-recurring and not reflective of the company's regular operations.
Similarly, the cumulative effect of accounting changes refers to adjustments made to a company's financial statements due to changes in accounting principles or methods. These changes can have a significant impact on a company's reported earnings. However, like extraordinary items, the cumulative effect of accounting changes is excluded from the calculation of EPS because it is a one-time event that does not reflect the company's ongoing profitability.
Therefore, EPS is calculated using income before extraordinary items and the cumulative effect of accounting changes. This ensures that the EPS figure reflects the company's regular operations and provides a more accurate measure of its profitability on a per-share basis.
In summary, while EPS is an important metric for assessing a company's profitability, it is calculated using income before extraordinary items and the cumulative effect of accounting changes, excluding non-recurring or one-time events that are not reflective of the company's ongoing operations. Hence, option B is the correct answer.