If a company’s profit before tax is Rs.500000/- and tax rate is 28%, preference share dividend is Rs.8000/-

Question

If a company’s profit before tax is Rs.500000/- and tax rate is 28%, preference share dividend is Rs.8000/-

Banking & FinanceFinance ManagementGrowth & Empowerment

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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

Mandalika

Published on 25-Sep-2020 17:59:09

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