Accounting · Earnings Per Share
Many commentators believe that the trend of earnings per share (EPS) is a more reliable indicator of underlying performance than the trend of net profit for the year. Which of the following statements supports this view?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The comparative EPS is restated where a change of accounting policy affects the previous year's profits
- 2The disclosure of a diluted EPS figure is a forecast of the future trend of profit
- 3EPS takes into account the additional resources made available to earn profit when new shares are issued for cash, whereas net profit does not✓
- 4Net profit can be manipulated by the choice of accounting policies but EPS cannot be manipulated in this way
Correct answer
EPS takes into account the additional resources made available to earn profit when new shares are issued for cash, whereas net profit does not
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