week 2fc - P3-5 Calculation of EPS and retained earnings a...

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P3-5 Calculation of EPS and retained earnings a. Earnings per share: Net Profit before taxes $436,000 Less: Taxes at 40% 174,400 Net profit after tax $261,600 Less: Preferred stock Dividends 64,000 Earnings available to common stockholders $197,600 Earnings per share= Earning available to common stockholders = $197,600 = $1.162 Total shares outstanding 170,000 b. Amount to retained earnings: 170,000 x $0.80 = $136,000 Earnings available to common share holders $197,600 Less: Common stock dividends 136,000 To retained earnings $ 61,600 P3-12. 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.
P3-14. Personal finance: Liquidity ratio

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