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XYZ Company's analysis on December 31: - net income for the year was 10.5 million -...

XYZ Company's analysis on

December 31:

- net income for the year was 10.5 million

- preferred stock dividends of 2 million were paid for the year

- common stock dividends of 3.5 million were paid for the year

- 20 million shares of common stock were outstanding on Jan 1, 2001

- The company issued 6 million new shares of common stock on Apr 1, 2001

The company's basic earnings per share for 2001 was closest to?

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Answer #1

Answer-The company's basic earnings per share for 2001 was closest to = 0.35 per share.

Explanation- Earnings per common share = Net Income – Preferred Dividends / Weighted Average number of Common shares outstanding

= ($10.5 million-$2 million)/ 24.5 million shares

= 0.35 per share

Where- Weighted Average number of Common shares outstanding-

= 20 million shares+ (6 million shares*9 months/12 months)

= 20 million shares+ 4.5 million shares

= 24.5 million shares

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