Murray Company reports net income of $770,000 for the year. It has no preferred stock, and...

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Murray Company reports net income of $770,000 for the year. It has no preferred stock, and...

Murray Company reports net income of $770,000 for the year. It has no preferred stock, and its weighted-average common shares outstanding is 280,000 shares.

Compute its basic earnings per share.

business accounting

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Answer 1

Answer #1

Meaning: Earnings per share (EPS) is used to determine the common shareholder’s portion of the company’s profit. EPS measures each common share’s profit allocation in relation to the company’s total profit.

Formula: Basic earning per share (BEPS) = (Net income available to shareholders) / (Weighted average number of shares outstanding)

Calculations: BEPS = 770,000/280,000= $2.75 share

Conclusion:BEPS shows how much of the company’s earnings are attributable to each common share. Higher the EPS, the more profitable the company is considered and more profits are available for distribution to its shareholders.

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Answer 2

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