Question

A company reported net income of $9,660,000 for the year. There were 4.1 million shares of common stock outstanding at the beginning of the year and 4.3 million shares outstanding at the end of the year. No dividends were declared during the year. What is the company’s earnings per share (EPS) for the year? (

Answer 1

THE COMPANY'S EARNING PER SHARE FOR THE YEAR WILL BE $2.30 PER SHARE.

Explanation:

FOR CALCULATING EARNING PER SHARE WE HAVE TO USED THE FOLLOWING FORMULA:

EARNING PER SHARE = $\frac{NET INCOME}{AVERAGE OF COMMON STOCK}$

GIVEN:

NET INCOME = $9,660,000

NO. OF OUTSTANDING SHARE AT BEGINNING OF YEAR = 4,100,000

NO. OF OUTSTANDING SHARE AT END OF YEAR = 4,300,000

AS PER GIVEN FORMULA :

AVERAGE COMMON STOCK OUT  STANDING = $\frac{4,100,000+4,300,000}{2}$ = 4200000 SHARES

NOW WE WILL FIND EARNING PER SHARE USING ABOVE FORMULA:

                 $\frac{9,660,000}{4,200,000}$

EARNING PER SHARE  = $ 2.30 PER SHARE