Question : 9% preference shares of 10 each Rs. 5,00,000, Equity shares of 10 each Rs.1,20,000, Profit after tax Rs.4,20,000, Equity dividend paid 20%, Market price of equity shares Rs.25 each. What will be the earnings per share?
Option 1: 3.20
Option 2: 3.30
Option 3: 3.125
Option 4: 3.32
Answer (1)
23rd Jan, 2024
Correct Answer: 3.125
Solution :
| Profit after tax | 4,20,000 |
| (-) Preference dividend (5,00,000 × 9%) |
(45,000) |
| Profit available for equity shareholders | 3,75,000 |
To calculate earnings per share, take a company's net income and subtract from that preferred dividends. Then divide that amount by the average number of outstanding common shares.
EPS = 3,75,000/1,20,000 = 3.125
Hence option 3 is the correct answer.
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