The following data are taken from the financial statements of Rosen, Inc. as of the
end of the year 2008.
Income before income taxes
Other current liabilities
The number of common shares outstanding at the beginning of the year was 40,000
shares, with 60,000 shares outstanding at the end of the year.
Earnings per share.
Current Assets = Accounts Receivable + Cash = $120,000
Current Liabilities = Accounts Payable + Other Current Liabilities + Wages Payable= $50,000
Current Ratio = 120000/50000 = 2.40
Working Capital = 120,000 – 50,000 = $70,000
EPS = $48,000/50,000 = $0.96 per share.
Since we do not have any data on when the additional 20,000 shares were issued, we use
the approximation of (40,000 + 60,000)/2 = 50,000 shares.