Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 13: Q23RQ (page 707)

What does earnings per share report, and how is it calculated?

Short Answer

Expert verified

Earnings per share represent the profit earned by the company on per outstanding share basis calculated on quarterly or yearly intervals.

Earnings per share = (Net income - preferred dividends) / weighted average of common shares outstanding

Step by step solution

01

Introduction to topic

Earnings Per Shares is a financial ratio, which divides net earnings available to common stockholders by the weighted average outstanding shares over a specific period of time.

02

Step 2:Reporting and calculation of earning per share

Earnings per share represents the amount of net income or loss for each share of the corporation's outstanding common stock. It is calculated by considering net income reduce preferred dividends divide the value by the weighted average number of common shares outstanding.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Sjostrom, Inc. had beginning retained earnings of \(300,000 on January 1, 2018. During the year, Sjostrom declared and paid \)140,000 of cash dividends and earned $200,000 of net income. Prepare a statement of retained earnings for Sjostrom, Inc. for the year ended December 31, 2018.

Vollmer, Inc. had reported the following balances:

December 31, 2019 December 31, 2018

Net Income \( 80,000 \) 60,000

Preferred Dividends 2,000 5,000

Total Stockholders’ Equity 340,000 310,000

Stockholders’ Equity attributable to Preferred Stock 20,000 20,000

Number of Common Shares Outstanding 10,000 14,000

11. Compute Vollmer’s earnings per share for 2019.

12. Compute Vollmer’s price/earnings ratio for 2019, assuming the market price is $40 per share.

13. Compute Vollmer’s rate of return on common stockholders’ equity for 2019.

Identifying advantages and disadvantages of a corporation

Following is a list of advantages and disadvantages of the corporate form of business. Identify each quality as either an advantage or a disadvantage.

c. Transfer of ownership is easy.

What are the basic rights of stockholders?

Computing earnings per share

HEB Corporation had net income for 2018 of \(60,450. HEB had 15,500 shares of common stock outstanding at the beginning of the year and 20,100 shares of common stock outstanding as of December 31, 2018. During the year, HEB declared and paid preferred dividends of \)2,600. Compute HEB’s earnings per share.
See all solutions

Recommended explanations on Business Studies Textbooks

Strategic Analysis

Read Explanation

Corporate Finance

Read Explanation

Nature of Business

Read Explanation

Business Development

Read Explanation

Business Operations

Read Explanation

Intermediate Accounting

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free