Session 5

Question 1

For the 2022 financial year Company A recorded a net profit of €50 million. The company had an
average of 20 million ordinary shares outstanding and no preference shares of convertible securities.

Required

Calculate Company A’s basic EPS.

Question 2

For the year ended 30 June 2014, ACCA Ltd had a net profit of €16.8 million and declared and paid a
dividend of €1.12 million on preference shares. The company had the following ordinary share
information:
Shares outstanding on 1 July 2013 640 000
Shares issued on 1 January 2014 128 000
Shares repurchased on 1 May 2014 (64 000)
Shares outstanding on 30 June 2014 704 000

REQUIRED

A. Calculate the company’s weighted average number of ordinary shares outstanding.

B. Calculate the company’s basic EPS.
C. Calculate the company’s basic EPS if six-for-one stock split.

Question 3

On 1 January 2020 Doodle Ltd had 4 000 000 ordinary shares in issue. On 1 March 2020, 400 000
new shares were issued. 31 December 4-for-1 share split took place. What is the weighted average
number of shares in issue for the year ended 31 December 2020 for the purpose of calculating basic
earnings per share? The net profit for the year ended 31 December was €8 million and the preferred
dividends was €1.3 million

Question 4

Woolworths reported a net profit of €14.3 million for the 2021 financial year. The company had an
average of 2.6 million ordinary shares outstanding throughout the year, as well as 400 000, €8
convertible preference shares. Each preference share is convertible into five ordinary shares of the
company.

REQUIRED

A. Calculate basic EPS.

B. Calculate diluted EPS.

Question 5

During the 2021 financial year Company Y made a net profit of €5 250 000 and had an average of 4.2
million ordinary shares outstanding. The company also had a €700 000 9% convertible bond that is
convertible into 350 000 ordinary shares. The corporate tax rate is 28%.
REQUIRED
A. Calculate basic EPS.
B. Calculate diluted EPS.

Question 6

During the 2013 financial year T.K MAX made a net profit of €50 million and had 12.5 million
ordinary shares outstanding. The company also had 625 000 €8 convertible preference shares, each
preference share is convertible into four ordinary shares of the company. T.K MAX is considering a
€500 000 5% convertible bond that is convertible into 200 000 ordinary shares to replace its
preference shares option. The corporate tax rate is 19%.

REQUIRED

A. Calculate basic EPS.

B. Calculate diluted EPS when the preference shares are exercised (without bond).
C. Calculate diluted EPS when the bond is exercised (without preference shares).

Question 7

Tech Junkie Ltd sells mobile phone, the company has asked you to assist in calculating their basic-
and diluted earnings per share for the year ended 31 August 2016. The following information for the
year ending 31 August 2016 was made available to you:
Value
Sales £756,000,000.00
Cost of Sales £454,000,000.00
Operating expenses £74,160,000.00

Additional information

The German corporate tax rate of 28% applies to the taxable income. Tech Junkie issued 310 000
convertible preference shares of €5 each. The preference share can be convertible (at the discretion
of the shareholder) into six ordinary shares of Tech Junkie Ltd.

REQUIRED
A. Calculate basic EPS.
B. Calculate diluted EPS.