A company reports the following in relation to its latest financial year:
$$\begin{array} { l r }
\text { Net profit } & \$ 12000 \
\text { Number of ordinary shares issued } & 5000 \
\text { Number of preference shares issued } & \
\text { (paying an annual dividend of } 50 \text { cents per share) } & 500
\end{array}$$
The company's basic earnings per share figure is:
A) $2.00
B) $2.20
C) $2.10
D) $2.35

Question

A company reports the following in relation to its latest financial year:
$$\begin{array} { l r } 
\text { Net profit } & \$ 12000 \
\text { Number of ordinary shares issued } & 5000 \
\text { Number of preference shares issued } & \
\text { (paying an annual dividend of } 50 \text { cents per share) } & 500
\end{array}$$
The company's basic earnings per share figure is:
A) $2.00
B) $2.20
C) $2.10
D) $2.35

Quizplus · Accepted Answer

The basic earnings per share (EPS) is calculated by subtracting the total preference dividends from the net profit and then dividing by the number of ordinary shares. The preference dividend is 500 shares * $0.50 = $250. Thus, EPS = ($12000 - $250) / 5000 = $2.35.

A Company Reports the Following in Relation to Its Latest