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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Evaluate alternative financing plans Obj. 1
Based on the data in Exercise E8-1. discuss factors other than earnings per share that should be considered in evaluating such financing plans.

To determine

Concept Introduction:

Basic Earnings per share:

The Basic Earnings per share is the amount of net income earned by each common share outstanding. The Earnings per share calculated by with help of following formula:

  Basic Earnings per share=Net Income - Preferred DividendWeighted Average Common Shares Outstanding

   Net Income available to common stockholder = Net income  Preferred Dividend

To Indicate:

The factors other earnings per share to evaluate the finance

Explanation

The factors other earnings per share to evaluate the finance are explained as follows:

1. Debt to equity ratio: The Company should check the burden of debts already taken before raising the finance trough debt.

2...

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