The issued Share Capital of BOUNCING BALL Plc is €500,000 Ordinary €0.

20 shares and 500,000

10% Non Convertible Preference shares as at 31 December 2014. Below is an extract from the
Statement of Comprehensive Income for the year ended 31 December 2014.

€’000
Net Profit after
taxation 600
Notes:

i. On 1 April 2014, BOUNCING BALL Plc has a bonus issue of 1 for 10

ii. On 1 July 2014, BOUNCING BALL issued a 1 for 5 rights issue at €4.00. The market value
pre-rights price was €6.30.

iii. BOUNCING BALL Plc issued a €500,000 10% Convertible Bond (2020) in January 2014. In
2020 this bond may convert into ordinary shares at a ratio of 5 shares for every €100 held in
the Bond. The corporate tax rate for BOUNCING BALL Plc is 25%.

iv. On 1 August 2014 3,000,000 options were issued at €7 per share when the average fair value
of the ordinary shares was €9.

v. EPS 2013 189c

REQUIREMENT

a) Calculate the Basic EPS for 2014. (10 marks)

b) Restate EPS for 2013 (2 marks)

c) Calculate the Diluted EPS for 2014 (10 marks)

d) Why is EPS an important measure for Investors (5 marks)

e) Where should the Basic and Diluted EPS be shown in the financial statements according to IAS
33? When is there an exception to this? (3 marks)

Total 30 Marks
On 1st January 2014, RINGER plc (“RINGER) had 1,000,000 €/£1 ordinary shares and 500,000 8% €1
convertible preference shares in issue. RINGER’ profit after tax for the year ended 31st December 2014
was:

Profit after Tax €3,500,000

On 1st April 2014, RINGER issued a further 400,000 €1 ordinary shares at full market price.

Warrants to purchase 350,000 € 1 ordinary shares were issued on 31st May 2014 at €3 per share.
While the warrants due to expire on 31st May 2019, all were exercised on 28th February 2015.
Convertible Loan Stock of €600,000 at an interest rate of 8% per annum was issued at par on 30th
June 2013. Each €100 loan stock is convertible into 20 €1 ordinary shares at any time at the option of
the holder. Interest is paid half yearly on 31st December and 30th June each year. On 1st July 2014,
€400,000 of loan stock was converted when the market price was €3 per share.

The preference shares are convertible into ordinary shares at the option of the holder on the basis of 1
€1 ordinary share for every 5 convertible preference shares held. Holders of 100,000 preference shares
converted them into ordinary shares on 1st October 2014.

The average market price of RINGER’ ordinary shares during the year ended 31st December 2014 was
€6 per share, and the tax rate is 30%.

RINGER’ financial statements for the year ended 31st December 2014 were approved on 31st March
2015
.
REQUIREMENT

Calculate the basic and diluted Earnings per Share for RINGER for the year ended 31st December
2014 in accordance with IAS 33 Earnings per Share. (25 marks)

Part (b)

Explain the importance of Earnings Per Share for an investor. (5 marks)