Earnings per share: Earnings per share represent the amount of income earned per share of outstanding common stock in a period. This ratio is used for analyzing the profitability of company’s stockholders’. The following formula can be used to calculate earnings per share: Earnings per share = Net income ( loss ) – Preferred dividends Average number of common shares outstanding To determine: The earnings per share of Company P for Year 3, Year 2, and Year 1.

Question

Pacific Gas and Electric Company is a large gas and electric utility operating in northern and central California. Three recent years of financial data for Pacific Gas and Electric Company are as follows: Fiscal Years Ended(in millions) Year 3 Year 2 Year 1 Net income $(6,837) $1,660 $1,407 Preferred dividends $14 $14 $14 Average number of common shares outstanding 517 512 499 a. Determine the earnings per share for fiscal Year 3, Year 2, and Year 1. Round to two decimal places. Negative amount should be indicated by the minus sign. Year 3 Earnings $fill in the blank 1 per share Year 2 Earnings $fill in the blank 2 per share Year 1 Earnings $fill in the blank 3 per share b. Evaluate the growth in earnings per share for the three years in comparison to the growth in net income for the three years. Round your answers to the nearest whole percentage. Negative amount should be indicated by the minus sign. Earnings per share growth as a…

Answer 1

Question

Chapter 11, Problem 11.24EX

(a)

To determine

Earnings per share:

Earnings per share represent the amount of income earned per share of outstanding common stock in a period. This ratio is used for analyzing the profitability of company’s stockholders’.

The following formula can be used to calculate earnings per share:

Earnings per share = Net income(loss) – Preferred dividendsAverage number of common shares outstanding

To determine: The earnings per share of Company P for Year 3, Year 2, and Year 1.

(b)

To determine

To evaluate: The growth in earnings per share for 3 years in comparison to the growth in net income for the 3 years.

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