What does EPS equal to? Select one: a. PAT/ Equity capital b. PBT/(Equity+Preference capital) c. PAT/(Equity+Preference...

What does EPS equal to? Select one:

a. PAT/ Equity capital

b. PBT/(Equity+Preference capital)

c. PAT/(Equity+Preference capital)

d. PBT/ Equity capital

Expert Solution

Answer for this question would be either a or c becuase you can calculate the eps only after paying the taxes.

Now, between a and c, question is which one is right.

Generally the formula for eps is simply, PAT/EQUITY CAPITAL.

Now what about the preferred capital.

If you have preferred capital, then the payout is fixed in form of preferred stock dividend. In this case, you subtract the preferred stock dividend from PAT and then divide it by equity capital.

So, the final ans is a.

jeff jeffy answered 2 years ago

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