- CFA Exams
- CFA Level I Exam
- Study Session 7. Financial Reporting and Analysis (2)
- Reading 21. Understanding Income Statements
- Subject 7. Earnings per Share
CFA Practice Question
The following information pertains to Bender, Inc. for last year:
- Net income of $25 million
- 1 million shares of $10 par value preferred stock outstanding paying a 10% dividend
- 50 million shares of common stock outstanding at the beginning of the year
- Issued an additional 5 million shares of common stock 6 months ago
What is Bender Inc.'s basic earnings per share (EPS)?
A. $0.476
B. $0.436
C. $0.457
Explanation: 50,000,000 common shares x 12months = 600,000,000
5,000,000 common shares x 6 months = 30,000,000 = 630,000,000
630,000,000/12 = 52,500,000
average shares [$25,000,000(NI) - $1,000,000(preferred dividends)]/52,500,000 shares = 24,000,000/52,500,000 = 0.457
5,000,000 common shares x 6 months = 30,000,000 = 630,000,000
630,000,000/12 = 52,500,000
average shares [$25,000,000(NI) - $1,000,000(preferred dividends)]/52,500,000 shares = 24,000,000/52,500,000 = 0.457
User Contributed Comments 2
| User | Comment |
|---|---|
| ptchan | diviend = 10% of par value of a p share |
| Sam123456 | 25 000 000 - 1 000 000(10)(0.1) = numerator 50 000 000 + 5 000 000(6/12) = denominator Answer = $0.457 |