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P3-5 Calculation of EPS and retained earningsa. Earnings per share:Net Profit before taxes $436,000Less: Taxes at 40% 174,400Net profit after tax $261,600Less: Preferred stock Dividends 64,000Earnings available to common stockholders $197,600Earnings per share= Earning available to common stockholders= $197,600 = $1.162Total shares outstanding 170,000b.Amount to retained earnings:170,000 x $0.80 = $136,000 Earnings available to common share holders $197,600Less: Common stock dividends 136,000To retained earnings $ 61,600P3-12. Ratio comparisons a. The companies are different the operating characteristics of the companies vary significantly, resulting in very different ratio values. b. The lower current and quick ratios believed that it operate primarily on a cash basis. Their accounts receivable balances are lower than for the other two companies. c. High level of debt can be maintained if the company has a large, predictable, and steady cash flow. d.Although the software industry has potentially high profits and investment return performance, it also has a large amount of uncertainty associated with the profits.