Earnings per share (EPS) : The amount of earnings made available to each common share is referred to as earnings per share. Dilutive securities like convertible bonds, convertible preferred stock , and stock options, reduce the EPS by increasing the common shares. Use the following formula to determine EPS: Earnings per share } = Earnings available to common shareholders Weighted average number of common shares outstanding = Net income –Preferred dividends Weighted average number of common shares outstanding To define : The potential dilutive shares.

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Answer 1

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Chapter 19, Problem 19.7BYP

(1)

To determine

Earnings per share (EPS): The amount of earnings made available to each common share is referred to as earnings per share. Dilutive securities like convertible bonds, convertible preferred stock, and stock options, reduce the EPS by increasing the common shares.

Use the following formula to determine EPS:

Earnings per share} = Earnings available to common shareholdersWeighted average number of common shares outstanding= Net income –Preferred dividendsWeighted average number of common shares outstanding

To define: The potential dilutive shares.

(2)

To determine

To describe: The effect of convertible bonds on diluted EPS

(3)

To determine

To describe: The reason for not including convertible debentures while computing diluted EPS.

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Exercise 14-3 (Static) Financial Ratios for Asset Management [LO14-3] Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below. The company did not issue any new common stock during the year. A total of 800,000 shares of common stock were outstanding. The interest rate on the bond payable was 12%, the income tax rate was 40%, and the dividend per share of common stock was $0.75 last year and $0.40 this year. The market value of the company’s common stock at the end of this year was $18. All of the company’s sales are on account. Weller Corporation Comparative Balance Sheet (dollars in thousands) This Year Last Year Assets Current assets: Cash $ 1,280 $ 1,560 Accounts receivable, net 12,300 9,100 Inventory 9,700 8,200 Prepaid expenses 1,800 2,100 Total current assets 25,080 20,960 Property and equipment: Land 6,000 6,000 Buildings and equipment, net 19,200 19,000 Total property and equipment 25,200 25,000 Total assets…

Exercise 16-2 (Algo) Financial Ratios for Assessing Liquidity (LO16-2] Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below. The company did not issue any new common stock during the year. A total of 500,000 shares of common stock were outstanding. The interest rate on the bond payable was 10%, the income tax rate was 40%, and the dividend per share of common stock was $075 last year and $0.40 this year. The market value of the company's common stock at the end of this year was $29. All of the company's sales are on account. Meller Corporation Conparative Balance Sheet (dollars in thousands) This Year Last Year Assets Current assets: Cash Accounts receivable, net Inventory Prepaid expenses Total current assets Property and equipment: $1,210 10,se0 13,000 750 $1,350 7,600 11,400 510 25,46e 20,860 Land 9,300 45,005 Bulldings and equipment, net Total property and equipnent 39,320 54,305 48,620 S 79,765 Total assets…

Problem 16-17 (Static) Interpretation of Financial Ratios [LO16-2, LO16-3, LO16-6] Pecunious Products, Incorporated's financial results for the past three years are summarized below: Sales trend Current ratio Acid-test ratio Accounts receivable turnover Inventory turnover Dividend yield Dividend payout ratio Dividends paid per share* Year 3 128.0 2.5 9.4 6.5 7.1% 40% $1.50 Year 2 115.0 2.3 0.9 10.6 7.2 6.5% 50% $ 1.50 Year 1 100.0 2.2 1.1 12.5 8.0 5.8% 60% $ 1.50 *There have been no changes in common stock outstanding over the three-year period. Required: Review the results above and answer the following questions: 1. Is it becoming easier for the company to pay its bills as they come due? 2. Are customers paying their accounts at least as fast now as they were in Year 1? 3. Are the accounts receivable increasing, decreasing, or remaining constant? 4. Is inventory increasing, decreasing, or remaining constant? 5. Is the market price of the company's stock going up or down? 6. Is the…

Answer 2

Question

Chapter 19, Problem 19.7BYP

(1)

To determine

Earnings per share (EPS): The amount of earnings made available to each common share is referred to as earnings per share. Dilutive securities like convertible bonds, convertible preferred stock, and stock options, reduce the EPS by increasing the common shares.

Use the following formula to determine EPS:

Earnings per share} = Earnings available to common shareholdersWeighted average number of common shares outstanding= Net income –Preferred dividendsWeighted average number of common shares outstanding

To define: The potential dilutive shares.

(2)

To determine

To describe: The effect of convertible bonds on diluted EPS

(3)

To determine

To describe: The reason for not including convertible debentures while computing diluted EPS.

Expert Solution & Answer

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Answer 3

Question

Chapter 19, Problem 19.7BYP

(1)

To determine

Earnings per share (EPS): The amount of earnings made available to each common share is referred to as earnings per share. Dilutive securities like convertible bonds, convertible preferred stock, and stock options, reduce the EPS by increasing the common shares.

Use the following formula to determine EPS:

Earnings per share} = Earnings available to common shareholdersWeighted average number of common shares outstanding= Net income –Preferred dividendsWeighted average number of common shares outstanding

To define: The potential dilutive shares.

(2)

To determine

To describe: The effect of convertible bonds on diluted EPS

(3)

To determine

To describe: The reason for not including convertible debentures while computing diluted EPS.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 19, Problem 19.7BYP

(1)

To determine

Earnings per share (EPS): The amount of earnings made available to each common share is referred to as earnings per share. Dilutive securities like convertible bonds, convertible preferred stock, and stock options, reduce the EPS by increasing the common shares.

Use the following formula to determine EPS:

Earnings per share} = Earnings available to common shareholdersWeighted average number of common shares outstanding= Net income –Preferred dividendsWeighted average number of common shares outstanding

To define: The potential dilutive shares.

(2)

To determine

To describe: The effect of convertible bonds on diluted EPS

(3)

To determine

To describe: The reason for not including convertible debentures while computing diluted EPS.

Expert Solution & Answer

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Answer 5

Chapter 19, Problem 19.7BYP

(1)

To determine

Earnings per share (EPS): The amount of earnings made available to each common share is referred to as earnings per share. Dilutive securities like convertible bonds, convertible preferred stock, and stock options, reduce the EPS by increasing the common shares.

Use the following formula to determine EPS:

Earnings per share} = Earnings available to common shareholdersWeighted average number of common shares outstanding= Net income –Preferred dividendsWeighted average number of common shares outstanding

To define: The potential dilutive shares.

(2)

To determine

To describe: The effect of convertible bonds on diluted EPS

(3)

To determine

To describe: The reason for not including convertible debentures while computing diluted EPS.

Answer 6

Chapter 19, Problem 19.7BYP

(1)

To determine

Earnings per share (EPS): The amount of earnings made available to each common share is referred to as earnings per share. Dilutive securities like convertible bonds, convertible preferred stock, and stock options, reduce the EPS by increasing the common shares.

Use the following formula to determine EPS:

Earnings per share} = Earnings available to common shareholdersWeighted average number of common shares outstanding= Net income –Preferred dividendsWeighted average number of common shares outstanding

To define: The potential dilutive shares.

Answer 7

Chapter 19, Problem 19.7BYP

(1)

To determine

Earnings per share (EPS): The amount of earnings made available to each common share is referred to as earnings per share. Dilutive securities like convertible bonds, convertible preferred stock, and stock options, reduce the EPS by increasing the common shares.

Use the following formula to determine EPS:

Earnings per share} = Earnings available to common shareholdersWeighted average number of common shares outstanding= Net income –Preferred dividendsWeighted average number of common shares outstanding

To define: The potential dilutive shares.

Answer 8

(2)

To determine

To describe: The effect of convertible bonds on diluted EPS

Answer 9

(2)

To determine

To describe: The effect of convertible bonds on diluted EPS

Answer 10

(3)

To determine

To describe: The reason for not including convertible debentures while computing diluted EPS.

Answer 11

(3)

To determine

To describe: The reason for not including convertible debentures while computing diluted EPS.

Answer 12

Expert Solution & Answer

Answer 13

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Answer 14

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Answer 15

Ch. 19 - Prob. 19.1Q Ch. 19 - Prob. 19.2Q Ch. 19 - The Tax Code differentiates between qualified...Ch. 19 - Stock option (and other share-based) plans often...Ch. 19 - What is a simple capital structure? How is EPS...Ch. 19 - Prob. 19.6Q Ch. 19 - Blake Distributors had 100,000 common shares...Ch. 19 - Why are preferred dividends deducted from net...Ch. 19 - Prob. 19.9Q Ch. 19 - The treasury stock method is used to incorporate...

Solution Summary: The author explains that dilutive securities like convertible bonds, preferred stock, and stock options reduce the EPS by increasing the common shares.

To describe: The effect of convertible bonds on diluted EPS

To describe: The reason for not including convertible debentures while computing diluted EPS.

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Chapter 19 Solutions