Question

Given the following information, calculate the firm's earnings per share: Total revenue $6,000,000 Retained earnings $900,000 Net income $1,200,000 Average common shares outstanding 1,000,000

1) $8.10
2) $6.00
3) $1.20
4) $0.90

Answer 1

To calculate the firm's EPS, divide the Net Income of $1,200,000 by the Average Common Shares Outstanding, which is 1,000,000 shares, resulting in an EPS of $1.20.

Step-by-step explanation:

To calculate the firm's earnings per share (EPS), we use the formula: EPS = Net Income / Average Common Shares Outstanding. In this scenario, the Net Income is reported as $1,200,000, and the Average Common Shares Outstanding are 1,000,000 shares.

To determine the EPS, we simply divide the Net Income by the total Average Common Shares Outstanding:
EPS = $1,200,000 / 1,000,000 shares = $1.20 per share.

Therefore, the correct answer from the given options is 3) $1.20.