Stucker Corp. just started their annual company-wide evaluation of the most recent year's performance. Management will look at many financial and nonfinancial measures as part of this comprehensive review. Their accountant compiled the following information:
Sales: $9,320,568
Operating Expenses: $7,623,004
Weighted Average Common Shares Outstanding ($2 per share): $12,467,200
If the company does not have preference shares and there is no income tax, then how much will their earnings per share (EPS) be for the year?

Question

Quizplus · Accepted Answer

This question requires familiarity with the formula for EPS: Net Income minus Preferred Dividends divided by the Number of Weighted Average Common Shares Outstanding. Before using this formula, solve for Net Income amount and the Number of Weighted Average Common Shares Outstanding. Net Income = Sales - Operating Expenses = $9,320,568 - $7,623,004 = $1,697,564. The Number of Weighted Average Common Shares Outstanding = $12,467,200/$2 = 6,233,600 shares. EPS = $1,697,564/6,233,600 shares = $0.27 per share (Choice B).