Target Exam

CUET

Subject

-- Accountancy Part B

Chapter

Accounting Ratios

Question:

Compute Earning per share from following information-

Net profit after tax but before dividend 1,75,000
Equity shares of ₹10 ₹7,00,000
Dividend declared @15%  
Market price of a share ₹13
Options:

₹4.3

₹5.2

₹3

₹2.50

Correct Answer:

₹2.50

Explanation:

The correct answer is option 4- ₹2.50.

Net profit after tax but before dividend 1,75,000
Equity shares of ₹10 ₹7,00,000
Dividend declared @15%  
Market price of a share ₹13

No of equity shares = Equity share Capital/Price per share
                             = 7,00,000/10
                             = 70,000

Profit available for equity shareholders = Profit after Tax – Dividend on Preference Shares
                                                        = 1,75,000 - 0
                                                        = 1,75,000

EPS = Profit available for equity shareholders/Number of Equity Shares
       = 1,75,000/70,000
       = 2.50