Wigeon Co's profit after tax for the year was $2,400,000. It paid ordinary dividends of $500,000 and dividends of $200,000 on irredeemable preference shares, which are classified as equity. There were 5 million ordinary shares in issue throughout the year. What is basic earnings per share?

Correct answer: A) 44 cents

Explanation

Basic EPS = profit attributable to ordinary equity holders / weighted average number of ordinary shares. Dividends on irredeemable preference shares classified as equity are deducted, but ordinary dividends are not. Earnings = $2,400,000 - $200,000 = $2,200,000. EPS = $2,200,000 / 5m = 44 cents.