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Answered

Suppose Ningbo Steel had sales revenue of $10,000 sales revenue, cost of goods sold of $5,000, operating expenses of $3000, interest expense of $1,000, a tax rate of 20%, and 2,000 shares of common stock outstanding. Based on this information, earnings per share was:
Select one:
a. $1.20
b. $1.00
c. $0.80
d. $0.40

Answer :

Parraingo

The earnings per share was $0.40

First calculate the pretax income for the period:

= Revenue - Cost of goods sold - Operating expenses - interest expenses

= 10,000 - 5,000 - 3,000 - 1,000

= $1,000

Then find the post tax income:

= Pretax income x (1 - tax rate)

= 1,000 x ( 1 - 20%)

= $800

The earnings per share is:

= Post tax income / Number of shares

= 800 / 2,000

= $0.40

The earnings per share is $0.40 per share.

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