Question

In: Accounting

Dakota Inc. and Jersey & Company are two large companies that manufacture and sell equipment used...

Dakota Inc. and Jersey & Company are two large companies that manufacture and sell equipment used in the construction, mining, agricultural, and forestry industries. The companies reported the following data (in millions) for two recent years:

Dakota Jersey
Year 2 Year 1 Year 2 Year 1
Net income $2,142 $3,715 $1,905 $3,252
Average number of common shares outstanding 594 599 334 363

a. Determine the earnings per share in Year 2 and Year 1 for each company. Round your answers to two decimal places.

Year 2 Year 1
Dakota $ per share $ per share
Jersey $ per share $ per share

b. Evaluate the relative profitability of the two companies.

earnings per share for Year 1 and Year 2 are higher than . However, from Year 1 to Year 2, the earnings per share for both companies . The slowing world economy contributed to the from Year 1 to Year 2. Overall, appears to be the more profitable company.

Solutions

Expert Solution

  • All working forms part of the answer
  • Requirement ‘a’

--working

Dakota

Jersey

Year 2

Year 1

Year 2

Year 1

A

Net income

$              2,142.00

$             3,715.00

$             1,905.00

$             3,252.00

B

Average number of common shares outstanding

594

599

334

363

C = A/B

Earnings per share

$                       3.61

$                     6.20

$                     5.70

$                     8.96

--Answer

Year 2

Year 1

Dakota

$                3.61

$               6.20

Jersey

$                5.70

$               8.96

  • Requirement ‘b’

Earnings per share for Year 1 and Year 2 of ‘Jersey’ are higher than ‘Dakota’ . However, from Year 1 to Year 2, the earnings per share for both companies ‘have decreased’ . The slowing world economy contributed to the ‘decrease’ from Year 1 to Year 2. Overall, ‘Jersey’ appears to be the more profitable company.


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