An enterprise reported earnings before tax of €6 million and tax of €1 million, with 1,500,000 issued ordinary shares. What is its earnings per share for the year?

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Prepare for the QFA Investments Exam 1. Study with flashcards and multiple-choice questions with detailed explanations. Enhance your understanding and succeed on your exam!

Multiple Choice

An enterprise reported earnings before tax of €6 million and tax of €1 million, with 1,500,000 issued ordinary shares. What is its earnings per share for the year?

Explanation:
EPS shows how much of the company's profit is allocated to each ordinary share. It is calculated as net income available to ordinary shareholders divided by the number of ordinary shares outstanding. Here, earnings before tax are €6 million and tax is €1 million, so net income is €5 million. With 1.5 million ordinary shares issued, EPS = 5,000,000 / 1,500,000 = €3.333..., which rounds to €3.33 per share.

EPS shows how much of the company's profit is allocated to each ordinary share. It is calculated as net income available to ordinary shareholders divided by the number of ordinary shares outstanding.

Here, earnings before tax are €6 million and tax is €1 million, so net income is €5 million. With 1.5 million ordinary shares issued, EPS = 5,000,000 / 1,500,000 = €3.333..., which rounds to €3.33 per share.

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