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
Updated on: 2020-09-25T14:30:23+05:30

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