Question

As a stockholder in Bozo Oil Company, you receive its annual report. In the financial statements, the firm has reported assets of $15 million, liabilities of $12 million, after-tax earnings of $2 million, and 843,000 outstanding shares of common stock. Calculate the earnings per share of Bozo Oil's common stock. (Round your answer to 2 decimal places.)

Answer 1

The earnings per share (EPS) for Bozo Oil Company is calculated by dividing the after-tax earnings ($2 million) by the number of outstanding shares (843,000), which results in an EPS of approximately $2.37.

Step-by-step explanation:

The question is asking us to calculate the earnings per share (EPS) for Bozo Oil Company. To find the EPS, we divide the company's after-tax earnings by the number of outstanding shares of common stock. Bozo Oil Company has reported after-tax earnings of $2 million and 843,000 outstanding shares of common stock.

The formula for EPS is:

EPS = Total Earnings / Number of Shares

Therefore:

EPS = $2,000,000 / 843,000

EPS = approximately $2.37 (Rounded to two decimal places)

Thus, Bozo Oil Company's earnings per share is roughly $2.37.