US CMA Part 2 · Chapter 2 · Question 5 of 15
Pembroke Industries reported net income of $1,250,000 and declared preferred dividends of $150,000. The weighted average number of common shares outstanding was 440,000. What is basic earnings per share?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) $2.50
Explanation
Basic EPS = (net income - preferred dividends) / weighted average common shares = ($1,250,000 - $150,000) / 440,000 = $1,100,000 / 440,000 = $2.50. Preferred dividends are deducted because those earnings are not available to common shareholders; ignoring them gives $2.84.
More Financial statement analysis: profitability, market measures and special issues MCQs
- Q7Ridley Motors' common stock trades at $42.00 per share and its earnings per share are $3.50. What is its price/earnings ratio?
- Q8Sutton Paper paid dividends of $1.20 per share. Its earnings per share were $3.00 and its share price is $30.00. What are its dividend…
- Q9Thornbury Inc. has total shareholders' equity of $5,600,000, which includes preferred stock with a liquidation value of $800,000. There…
- Q10Upton Devices has a return on equity of 16% and a dividend payout ratio of 35%. Assuming it maintains its capital structure and these…
- Q11Which of the following is the strongest indicator of LOW earnings quality?