ExpertMedium2 marksShort Answer
ACCA · Question 35 · Interpretation of Financial Statements
A tech company has a Profit After Tax of $1,200,000. It pays preference dividends of $200,000. The company has 4,000,000 ordinary shares in issue throughout the year. What is the Earnings Per Share (EPS) in cents? (Enter numbers only)
A tech company has a Profit After Tax of $1,200,000. It pays preference dividends of $200,000. The company has 4,000,000 ordinary shares in issue throughout the year. What is the Earnings Per Share (EPS) in cents? (Enter numbers only)
How to approach this question
EPS = (Profit After Tax - Preference Dividends) / Number of Ordinary Shares. Multiply by 100 to get cents.
Full Answer
Earnings available to ordinary shareholders = Profit After Tax ($1,200,000) - Preference Dividends ($200,000) = $1,000,000.
EPS = $1,000,000 / 4,000,000 shares = $0.25 per share.
In cents, this is 25 cents.
Common mistakes
Forgetting to deduct preference dividends, resulting in 30 cents.
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