Question

An analyst has compiled the following information regarding Fox, Inc. for 2014

Beginning retained earnings $60 millions

Earning per share      $5

Shares outstanding 13.6 millions

Dividends per share $2.2

What would be the ending retained earnings?

Answer 1

First we calculate the net income, as it will be added in the beginning retained earnings

Earnings per share = $5

Shares outstanding = 13.6 million

Net income = Shares outstanding * Earnings per share

Net income = 13.6 million * $5

Net income = $68 million

Now, we will calculate dividends paid, as they will be deducted to arrive at the ending retained earnings balance.

Dividends per share = $2.2

Shares outstanding = 13.6 million

Dividends paid = Dividends per share * Shares outstanding

Dividends paid =$2.2 * 13.6 million

Dividends paid = $29.92

Now, we will calculate the ending retained earnings:

Beginning retained earnings $60 million

Add: Net income $68 million

Less: Dividends paid ($29.92)

Ending retained earnings $98.08 million