Corporate Financial Accounting
14th Edition
ISBN: 9781305653535
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Question
Chapter 12, Problem 12.1ADM
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:
To compute: Earnings per share of Incorporation A and company W.
B.
To determine
To identify: The company which appears to be more profitable on the basis of earnings per share.
C.
To determine
To explain: The possible reasons behind the differences between the Incorporation A and Company W’s market price per share and earnings price per share.
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Students have asked these similar questions
Amazon.com, inc. is one of the largest Internet retailers in the world. Wal-Mart is the largest retailer in the United States. Amazon and Wal-Mart compete in similar markets; however, Wal-Mart sells through both traditional retail stores and the Internet, while Amazon sells only through the Internet. Earnings and Common Stock Outstanding information was obtained from recent financial statements for both companies as follows (in million): Amazon . Wal-Mart Net Income $2,371 $14,694 Average Number of Common Shares Outstanding. . $ 474 $ 3,207 Required: a. Determine the Earnings Per Share for each company. Neither company had Preferred Stock Outstanding. Round to the nearest cent. b. Which company appears more profitable from an Earnings-Per-Share perspective. c. The market price of Amazon Common Stock was $750 per share at a time when Wal-Mart's was $69 per share. How would you explain this difference in Market Price given the Earnings-Per-Share computed in (a) for both companies?
Making Business Decisions: Analyzing Wal-Mart's Gross Profit Ratio
You are considering an investment in the common stock of Wal-Mart. The following information is from the consolidated statements of income of Wal-Mart Stores, Inc. and Subsidiaries for the years ended January 31, 2016, and 2015 and the consolidated statements of operations for its competitor Target Corporation for the years ended January 30, 2016, and January 31, 2015 (included in the companies’ Form 10-Ks, amounts in millions of dollars):
Wal-Mart
Target
(in millions)
Year EndedJanuary 31, 2016
Year EndedJanuary 31, 2015
Year EndedJanuary 30, 2016
Year EndedJanuary 31, 2015
Sales*
$478,614
$482,229
$73,785
$72,618
Cost of sales
360,984
365,086
51,997
51,278
*Described as net sales by Wal-Mart.
Required:
1. Calculate the gross profit ratios for Wal-Mart and Target for 2016 and 2015. Enter the amounts as a percent, rounded to one decimal place.
Wal-Mart's 2016 gross…
Making Business Decisions: Analyzing Wal-Mart's Gross Profit Ratio
You are considering an investment in the common stock of Wal-Mart. The following information is from the consolidated statements of income of Wal-Mart Stores, Inc. and Subsidiaries for the years ended January 31, 2016 and 2015 and the consolidated statements of operations for its competitor Target Corporation for the years ended January 30, 2016, and January 31, 2015 (included in the companies’ Form 10-Ks, amounts in millions of dollars):
Wal-Mart
Target
(in millions)
Year EndedJanuary 31, 2016
Year EndedJanuary 31, 2015
Year EndedJanuary 30, 2016
Year EndedJanuary 31, 2015
Sales*
$478,614
$482,229
$73,785
$72,618
Cost of sales
360,984
365,086
51,997
51,278
*Described as net sales by Wal-Mart.
Calculate the gross profit ratios for Wal-Mart and Target for 2016 and 2015. Enter the amounts as a percent, rounded to one decimal place.
Chapter 12 Solutions
Corporate Financial Accounting
Ch. 12 - Of two corporations organized at approximately the...Ch. 12 - A stockbroker advises a client to buy preferred...Ch. 12 - A corporation with both preferred stock and common...Ch. 12 - An owner of 2,500 shares of Simmons Company common...Ch. 12 - Prob. 5DQCh. 12 - Prob. 6DQCh. 12 - A corporation reacquires 60,000 shares of its own...Ch. 12 - The treasury stock in Discussion Question 7 is...Ch. 12 - Prob. 9DQCh. 12 - Prob. 10DQ
Ch. 12 - Prob. 12.1BECh. 12 - Prob. 12.2BECh. 12 - Entries for cash dividends The declaration,...Ch. 12 - Entries for stock dividends Alpine Energy...Ch. 12 - Prob. 12.5BECh. 12 - Reporting stockholders equity Using the following...Ch. 12 - Retained earnings statement Noric Cruises Inc....Ch. 12 - Dividends per share Seventy-Two Inc., a developer...Ch. 12 - Prob. 12.2EXCh. 12 - Entries for issuing par stock On January 22,...Ch. 12 - Prob. 12.4EXCh. 12 - Issuing stock for assets other than cash On...Ch. 12 - Selected stock transactions Alpha Sounds Corp., an...Ch. 12 - Issuing stock Willow Creek Nursery, with an...Ch. 12 - Issuing stock Professional Products Inc., a...Ch. 12 - Entries for cash dividends The declaration,...Ch. 12 - Entries for stock dividends Healthy Life Co. is an...Ch. 12 - Prob. 12.11EXCh. 12 - Effect of cash dividend and stock split Indicate...Ch. 12 - Selected dividend transactions, stock split...Ch. 12 - Prob. 12.14EXCh. 12 - Treasury stock transactions SprayCo Inc. develops...Ch. 12 - Prob. 12.16EXCh. 12 - Reporting paid-in capital The following accounts...Ch. 12 - Stockholders Equity section of balance sheet The...Ch. 12 - Stockholders Equity section of balance sheet...Ch. 12 - Retained earnings statement Sumter Pumps...Ch. 12 - Stockholders Equity section of balance sheet List...Ch. 12 - Prob. 12.22EXCh. 12 - Dividends on preferred and common stock Pecan...Ch. 12 - Prob. 12.2APRCh. 12 - Stock transactions for corporate expansion On...Ch. 12 - Entries for selected corporate transactions Morrow...Ch. 12 - Entries for selected corporate transactions...Ch. 12 - Prob. 12.1BPRCh. 12 - Stock transaction for corporate expansion Pulsar...Ch. 12 - Selected stock transactions Diamondback Welding ...Ch. 12 - Entries for selected corporate transactions Nav-Go...Ch. 12 - Entries for selected corporate transactions West...Ch. 12 - Selected transactions completed by Equinox...Ch. 12 - Prob. 12.1ADMCh. 12 - Prob. 12.2ADMCh. 12 - Prob. 12.3ADMCh. 12 - BBT and Regions Financial: Earnings per share BBT...Ch. 12 - Ethics In Action Tommy Gunn is a division manager...Ch. 12 - Prob. 12.3TIF
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