1. How is earnings per common share calculated? 2. Which of the following items
ID: 1171359 • Letter: 1
Question
1. How is earnings per common share calculated?
2. Which of the following items could be found on a statement of shareholders' equity?
Note: Add additional information to your selection for question 2.
a. Reasons for retained earnings increases or decreases.
b. A reconciliation of beginning to ending cash.
c. The market value of the firm’s common stock.
d. Assets = Liabilities + Stockholders’ Equity.
Use the following information for Jett Co. to answer questions 3 and 4.
2015 2014
Sales 1,200 1,000
COGS 850 700
Operating expenses 200 200
Income taxes 30 35
3. Jett Co.'s gross profit, operating profit and net profit margins for 2015 are:
* Show your work
a. 50.0%, 32.5%, 22.5% respectively.
b. 29.2%, 12.5%, 10.0%, respectively.
c. 27.0%, 11.0%, 10.5%, respectively.
d. 21.5%, 17.5%, 12.0%, respectively.
4. Jett Co.'s average tax rates for 2015 and 2014 are:
* Show your work
a. 15.5% and 10.0%
b. 20.0% and 35.0%
c. 25.8% and 35.4%.
d. 31.4% and 36.8%.
Explanation / Answer
Answer to Q1 -Earning per share is an amount of profits allocated to each equity share. It is an indicator of firm's profitability.
EPS= Net profit after Preference Dividend/ Number of equity shares outstanding
Answer to Q2- items which can be found in statement of share holders equity
A reasons for increase and decrease in retained earnings
Though eps is a share of profits of each share holder but company may distribute dividend or may retain some profit there. This will be part of statement of share holders equity
C . Market value of firm's common stock- MV of shares is a representation of the profitability and effect of Esp.
D. Asset= liability + share holders equity
It is a capital which is invested by owners.
For questions 3& 4 it is not clear as to what is required to be calculated .
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