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MC - finance - earnings per share, cash flow

14. The earnings per share of common stock calculation:
a. is made by dividing net income by the number of shares of common stock outstanding at the end of the year.
b. is complicated by the declaration of cash dividends during the year.
c. includes gains or losses from treasury stock transactions.
d. is complicated by the presence of preferred stock in the capital structure.

15. Which of the following is an accurate statement regarding a statement of cash flows?
a. Only cash items that affect the income statement are included.
b. Only material cash items that affect the income statement are included.
c. Material noncash transactions are included.
d. Immaterial financing activities that affect cash do not need to be included.
e. None of these.

16. In the statement of cash flows, an increase in the accounts receivable balance from the beginning of the period to the end of the period would:
a. be added to net income because this represents earned revenues that have not been collected.
b. be subtracted from net income because this represents earned revenue provided by operating earnings.
c. be added to net income because this means that revenues were less than cash collected.
d. be subtracted from net income because this means that revenues were more than cash collected.

Solution Preview

14.
The earnings per share of common stock calculation:
d. is complicated by the presence of preferred stock in the capital structure.
EPS: Net income less preferred dividends / weighted average common ...

Solution Summary

A sentence tells you why each answer is chosen.

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