Question

Farah Snack Co. has earnings after taxes of $108,750. Interest expense for the year was $20,000; preferred dividends paid were $18,750; and common dividends paid were $30,000. Taxes were $15,000. The firm has 100,000 shares of common stock outstanding. Earnings per share on the common stock was?

Answer 1

Answer:

$0.9

Explanation:

Data provided in the question:

Earnings after taxes = $108,750

Interest expense for the year = $20,000

Preferred dividends paid = $18,750

Common dividends paid = $30,000

Common stock outstanding = 100,000 shares

Now,

Earning available on common stock

= Earnings after taxes - Preferred dividends paid

= $108,750 - $18,750

= $90,000

Therefore,

Earnings per share on the common stock

= Earning available on common stock ÷ Common stock outstanding

= $90,000 ÷ 100,000

= $0.9