Question

When the number of common shares outstanding has changed during the year, net income is divided by

(A) weighted-average shares outstanding of both common and preferred
(B) weighted-average shares outstanding of common
(C) number of common shares outstanding at the balance sheet date
(D) number of common shares outstanding at the beginning of the accounting period
(E) number of common shares authorized

Answer 1

When the number of common shares outstanding has changed during the year, net income is divided by the weighted-average shares outstanding of both common and preferred. Option a

Step-by-step explanation:

When the number of common shares outstanding has changed during the year, net income is divided by the weighted-average shares outstanding of both common and preferred.

This calculation is used to determine the earnings per share (EPS), which is a financial metric that shows the portion of a company's profit allocated to each outstanding share of common stock. By using the weighted-average shares outstanding, we account for any changes in the number of shares throughout the year.

Dividing the net income by the weighted-average shares outstanding of both common and preferred gives us an indication of how much profit is generated per share, allowing investors to compare the profitability of different companies. Option a