Question

Q. No. 03 EPS calculations:
1. Following data of ABC & Company is available:
a. Sales Revenue Rs. 2,500,000
b. Gross Profit Margin Rs. 80%
c. Operating expenses 30% of GP
d. Depreciation Rs. 60,000
e. Amortization Rs. 30,000
f. Interest Expense Rs. 100,000
g. Tax Rate 35%
h. 10% Preferred Stock, issued 15,000 shares with F.V of Rs. 100 each
i. Common Stock, Authorized 100.000 shares and issued shares 30,000 shares with FV of Rs. 10 each.

j. Make Income Statement and calculate PAT (Profit After Tax)?
k. Calculate EPS (Earning per share)?
l. Just analyze whether the EPS is good enough for Common Stock holders or not.

Answer 1

Income Statement

Sales Revenue		2,500,000
Gross Profit	80%	2,000,000
Operating Expenses	30% of GP	600,000
Depreciation Expense		60,000
Amortization Expense		30,000
Interest Expense		100,000
Profit Before taxes		1,210,000
Taxes	35%	423,500
Profit after Taxes		786,500

Answer to 2

Earning per Share = Net income - Preference Dividend/ Shares Outstanding

                           = (786,500 - 150,000)/ 30,000

                           = 21.2 Per share

Answer 3

Yes EPS is good enough for Common stock holders after Preference dividend.

Preference shares dividend : 10% on FV of 100 means 10 Per share total share 15,000 ; 15,000*$10 ; 150,000