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EPS Caterpillar 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: 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.

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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 13, Problem 25E
Textbook Problem
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EPS

Caterpillar 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:

Chapter 13, Problem 25E, EPS Caterpillar Inc. and Deere  Company are two large companies that manufacture and sell equipment

  1. a. Determine the earnings per share in Year 2 and Year 1 for each company. Round to the nearest cent.
  2. b. Evaluate the relative profitability of the two companies.

(a)

To determine

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

Explanation of Solution

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

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

 Earnings per share
Year 2Year 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

(b)

To determine

Evaluate the relative profitability of the Company C and Company D.

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Chapter 13 Solutions

Financial Accounting
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