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If a company’s profit before tax is Rs.500000/- and tax rate is 28%, preference share dividend is Rs.8000/-
Date | Particulars | Purchase | Sell | Remaining |
---|---|---|---|---|
01.04.XXXX | Total shares | 20000 | ||
01.10.XXXX | Preference share is converted to equity share | 4500 | 24500 | |
01.01.XXXX | Shares buyback | 2000 | 22500 |
Considering above data and table. Calculate EPS
Solution
The solution is given below −
EPS = (P-Pd) / WACS
- Calculating Profits minus preference shares (P-Pd).
P – Pd = profit before tax – profit after tax rate – preference share dividends
P – Pd = 500000 – {500000 (28%)} - 8000
P - Pd = 500000 – 140000 – 8000
P – Pd = 352000/-
- Weighted Average number of shares (WACS).
WACS = (20000*(6/12)) + (24500*(3/12)) + (22500*(3/12))
WACS = 10000 + 6125 + 5625
WACS = 21750/-
EPS = (P-Pd) / WACS EPS = 352000 / 21750 EPS = 16.18
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