Question

Academy Driving School reported the following amount in its financial statements:

2013 2012
Number of common shares 11,500 11,500
Net income $ 23,000 $ 18,000
Cash dividends paid on common stock $ 3,000 $ 3,000
Total stockholders' equity $ 240,000 $ 220,000


Calculate 2013 EPS and ROE

Answer 1

To calculate 2013 EPS for Academy Driving School, divide the net income ($23,000) by the number of shares (11,500), resulting in approximately $2 per share. For ROE, divide the net income by total stockholders' equity, yielding about 9.58% for 2013.

Step-by-step explanation:

The student is asking how to calculate the Earnings per Share (EPS) and Return on Equity (ROE) for Academy Driving School for the year 2013.

EPS is calculated by dividing the net income by the number of common shares outstanding. Therefore, for 2013, the EPS would be $23,000 divided by 11,500 shares, resulting in approximately $2 per share. ROE measures a corporation's profitability in generating profits from its shareholders' equity. ROE is calculated by dividing net income by total stockholders' equity. Hence, for 2013, the ROE would be $23,000 divided by $240,000, which is roughly 9.58%.