# EPS Caterpillar Inc. and Deere &amp; Company are two large companies that manufacture and sell equipment used in the construction, mining, agricultural, and forestry industries. The companies reported the following data (in millions) for two recent years: Caterpillar Deere Year 2 Year 1 Year 2 Year 1 Net income $2,102$3,695 $1,940$3,162 Average number of common shares outstanding 594 599 334 363 a. Determine the earnings per share in Year 2 and Year 1 for each company. Round to the nearest cent. b. Evaluate the relative profitability of the two companies.

### Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

### Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

#### Solutions

Chapter
Section
Chapter 13, Problem 13.25EX
Textbook Problem

## EPSCaterpillar Inc. and Deere & Company are two large companies that manufacture and sell equipment used in the construction, mining, agricultural, and forestry industries. The companies reported the following data (in millions) for two recent years:   Caterpillar Deere   Year 2 Year 1 Year 2 Year 1 Net income $2,102$3,695 $1,940$3,162 Average number of common shares outstanding 594 599 334 363 a. Determine the earnings per share in Year 2 and Year 1 for each company. Round to the nearest cent. b. Evaluate the relative profitability of the two companies.

Expert Solution

(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 shareNet income(loss) – Preferred dividendsAverage number of common shares outstanding

To determine: The earnings per share of Company C and Company D for Year 2 and Year 1.

### Explanation of Solution

Determine the earnings per share of Company C and Company D for Year 2 and Year 1.

 Earnings per share Year 2 Year 1 Company C $3.54 per share$6.17 per share Company D $5.81 per share$8.71 per share

Working note:

Determine the earnings per share of Company C for Year 2 and Year 1.

Earnings per share of Company C for Year 2}Net incomeAverage number of common shares outstanding=$2,102594 shares$3.54per share

Earnings per share of Company C for Year 1}Net incomeAverage number of common shares outstanding=$3,695599 shares$6

Expert Solution

(b)

To determine

To evaluate: The relative profitability of the Company C and Company D.

### Want to see the full answer?

Check out a sample textbook solution.See solution

### Want to see this answer and more?

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

See solution

Find more solutions based on key concepts
Show solutions
What does the invisible hand of the marketplace do?

Principles of Microeconomics (MindTap Course List)

Describe the four forms of organizational structure.

Foundations of Business (MindTap Course List)

What are some actions that stockholders can take to ensure that managements and stockholders interests are alig...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

Why must Work in Process Inventory be adjusted for factory overhead applied at year-end?

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)

Should an economic model describe reality exactly?

Principles of Macroeconomics (MindTap Course List)