StudentShare solutions
Triangle menu

Earnings per share for xyz Company - Term Paper Example

Not dowloaded yet

Extract of sample
Earnings per share for xyz Company

They normally give Earning per share a certain distinction among the financial ratios. Earnings per share are considered very important in a business since it allows the investors to know how much the business earned in their stock share investment. In other words, EPS shows how much in terms of net income did the business earned for each stock share owned. Basic EPS Ratio The essential EPS is given by the equation; EPS = Net Income / Total number of stock share (Wiley, 2013). For example, in the following income statement, the company’s $32.47 million net income is divided by the 8.5 million shares of stock it owns to get the $3.82 EPS. Income statement for the year 2010 Sales revenue $457,000 Cost of goods sold expense $298,750 Gross Margin $158,250 Sales, Administration and general expense 102, 680 Earnings before interest and income tax $55,570 Interest expense 6,250 Earnings before income tax $49,320 Income tax expense 16,850 Net income $32,470 Basic earnings per share $3,82 Diluted earnings per share $3,61 EPS = 32.47million/8.5million = $3.82 For the stakeholders of businesses whose shares are publicly traded, EPS becomes extraordinarily important. The stakeholders therefore need to pay close attention to the market price per share. In such cases, the stakeholders would prefer their net income to be communicated to them in terms of per share so that they can be able to compare it with the market price of the stock per share (Bryan, 2011). Unlike publicly owned companies, the stock shares of privately owned companies are not traded actively. This is because they do not have to report their EPS according to the GAAP. This exemption is explained by the fact that their stockholders do not focus on per share values but are instead interested in the business’s net income. The Diluted EPS Ratio The XYZ Company could be listed in the New York Stock Exchange (NYSE) given the assumption that its shares are traded at $70 per share. Well known as the Big Board, requires that requires that the market capital which includes the total of the shares issued and the outstanding shares, should be at the least, $100 million and the number of shares available for trading should be at least 1.1 million. The Company’s market capital is $595 million with the 8.5 million shares trading at $70 per share and this is well above the NYSE’s minimum. By the end of the year, this company has 8.5 million shares just outstanding. This number refers to the number of stock shares that have been issues and are now owned by its stakeholders. Therefore, the Earnings per share is $3.82 as has been computed. Nevertheless, a complication sets in when the business is committed to issuing additional capital stock shares in the future for stock options granted to the executives by the company, and it has funds borrowed on the basis of debt instruments. This particularly gives the lenders the right to convert the debt into its capital stock. Following that, the business may have to issue 500,000 additional capital stock shares in the future under terms of its management options as well as its convertible debts. When we divide the net income by the number of the outstanding shares plus the additional shares that could be issued in the future, the following EPS computation emerges; $32.47million net income ? 9million capital stock shares issued and potentially issuable = $3.61 EPS This second computation, as can be seen, has higher number of stock shares and is therefore referred to as diluted earnings per share. The term diluted is used to refer to thinned out or spread over a large number of shares. That notwithstanding, the ...Show more

Summary

Most publicly owned companies like XYZ Company, according to the Generally Accepted Accounting Principles, are required to report Earnings per Share in their income statementsThey normally give Earning per share a certain distinction among the financial ratios…
Author : earnest94
Earnings per share for xyz Company essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the term paper on your topic
"Earnings per share for xyz Company"
with a personal 20% discount.
Grab the best paper

Related Essays

Company analysis: Intel Corporation
Moreover, the discussion presented through this study also focuses on external analysis by utilizing certain analytical tools such as stakeholder analysis, Porter’s five forces and general evaluation of its external environment. Additionally, this discussion also bases its arguments on internal analysis of Intel by considering certain strategic tools including VRIO framework, value chain model to identify the organizational strengths as well as weaknesses.
18 pages (4500 words) Term Paper
Costco Company
For example, based on the technological advancement, majority of companies have emulated e-marketing as a way of expanding their marketing share thus increasing their total sales and revenue. Similarly, firms have adopted extensive advertisement and promotion of their brands through social sites such as face book and twitter in order to attract young consumers who are regular visitors of the social sites.
15 pages (3750 words) Term Paper
Wells Fargo & Company Bank
Department of Treasury and TARP funds received by the bank. It shall also discuss the balance sheet and the income statement for 2009 and 2010. The performance of the traded stocks of the bank shall also be presented in this financial report.
5 pages (1250 words) Term Paper
Company analysis - Sears
The work illustrates the five forces of competition and how they impact the company. This paper finally provides a SWOT analysis of the company and discusses the various levels and types of strategies the firm may use to maximize its competitiveness and profitability.
6 pages (1500 words) Term Paper
Boeing Bets the Company
Boeing made some key acquisitions to improve its position in the military market, but as a consequence they loss track of the importance of the commercial airplane sector. The market share of the company decreased from 70% in 1996 to less than half that by 2003.
3 pages (750 words) Term Paper
Company Analysis of the Walt Disney Company (DIS)
Walt Disney is a mass media corporation recognized as the largest media conglomerate globally, due to the expanse of its revenue. Walt and Roy Disney founded the corporation in 1923 as Disney Brothers Cartoon Studio, growing progressively later to become one of the leading foundations in the American animation industry.
6 pages (1500 words) Term Paper
Marketing company research
Marketing Tactics 8 a)Product Issue 8 b)Placement/Distribution 9 c)Pricing 10 d)Advertising and Promotion 10 e)Service Elements 11 IV. Implementation 12 a)Resources Required 12 b)Time-Line 13 V. Contingency Plan and Evaluation 13 Works Cited 14 The Executive Summary After two years of consecutive negative growth, the consumer electronics industry of UAE has experienced solid growth.
13 pages (3250 words) Term Paper
Write-up of reoccurring themes per document
Write-up of “reoccurring themes” per document Name Institution Tutor Date Write-up of “reoccurring themes” per document Role model A role model refers to anybody who is an example in another person‘s life, whose behavior influences others (Scarnati, 2002).
4 pages (1000 words) Term Paper
Procter&gamble company
P&G boasts of 50 leadership brands which are common household names and which account for 90 percent of its sales and profits. Leadership brands include 25 such brands that generate more than $1 billion in annual sales. With an eye to enhance business performance, P&G has divided its Global Business Units into four industry-based sectors.
7 pages (1750 words) Term Paper
Mabeche Company
All through the period under assessment, the Mabeche Company performed exceptionally well. In actual fact, this is the unsurpassed performance ever in the company’s 10-year history as the bank attained a number one spot in provisions of profits, branch network, capitalization and balance sheet dimension in the region.
5 pages (1250 words) Term Paper
Get a custom paper written
by a pro under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
YOUR PRIZE:
Apply my DISCOUNT
Comments (0)
Rate this paper:
Thank you! Your comment has been sent and will be posted after moderation