In order to compute common earnings per share, preferred dividends are first subtracted from income from continuing operations, and from income before extraordinary items, and from net income; then the remainder is used to compute earning per share. Explain why. When earnings per share is compared to the market price of the stock what statistic is created? Company A has earning per share of $5 and a market price of $40. Company B has earnings per share of $12 and a market price of $120. If each Company has exactly the same amount of risk and potential, which Company is the better buy? Why? Explain.