Question

Earnings per share, EPS is calculated using the formula \large EPS=\frac{NI-PD}{SO}, where NI is net income, PD is preferred dividence, and SO number of outstanding shares.

What is a company's net income if they have $50,000 in preferred dividends and pay out $0.55 per share on 200,000 shares?

Answer 1

Answer: $160,000

Explanation:

Given the following :

Earning per share (EPS) = $0.55

Number of outstanding shares = 200,000

Preferred dividend = $50,000

EPS = (NET INCOME - PREFERRED DIVIDEND) / NUMBR OF OUTSTANDING SHARES

0.55 = ( NET INCOME - 50000) / 200000

200000 × 0.55 = NET INCOME - 50000

110,000 = NET INCOME - 50000

NET INCOME = 110,000 + 50,000

NET INCOME = $160,000