Question

Sol-tex has net income of $1,300,000 and 400,000 shares outstanding. it has preferred dividends of $300,000. what are the earnings per share?

Answer 1

To find the earnings per share (EPS) the equation is as follows:
EPS = (net income - dividends on preferred stock)/average outstanding common shares
EPS = (1,300,000-300,000)/400,000
EPS = 1,000,000/400,000
EPS = 2.50
Sol-tex has an earnings per share of $2.50