Answer the questions from the passage-
Following information is provided about a Company:
Share Capital:
Equity (Rs.10) Rs. 4,00,000
12% Preference Rs. 1,00,000
General Reserve Rs. 1,84,000
10% Debentures Rs. 4,00,000
Current Liabilities Rs. 1,00,000
Fixed Assets Rs. 9,50,000
Current Assets Rs. 2,34,000
The market price of the share is Rs. 34 and the net profit after tax was Rs. 1,50,000, and the tax had amounted to Rs. 50,000.
EPS (Earning per share)-
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → 3.45
Earnings per share is the profit that belongs to one equity share. Preference shareholders are paid their fixed dividend before the equity shareholders, so that dividend is taken out of the profit after tax first.
Preference dividend = 12% of Rs 1,00,000 = Rs 12,000
Profit available for equity shareholders = Rs 1,50,000 − Rs 12,000 = Rs 1,38,000
Number of equity shares = Rs 4,00,000 ÷ Rs 10 = 40,000
EPS = Rs 1,38,000 ÷ 40,000 = Rs 3.45
Dividing the full Rs 1,50,000 by 40,000 shares would give Rs 3.75, which wrongly hands the preference dividend to the equity shareholders.
NCERT (2026-27 edition):
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