Use the Table for the Question(s) Below -Consider the Above Income Statement for CharmCorp

question 18

Multiple Choice

Use the table for the question(s) below
$\begin{array}{l}\text { Income Statement for CharmCorp: }\\\begin{array} { l r r } & 2011 & 2012 \\\text { Total sales } & 600 & 540 \\\text { Cost of sales } & - 532 & - 488 \\\hline \text { Gross Profit } & 68 & 52 \\\text { Selling, general, } & & \\\text { and administrative expenses } & - 36 & - 21 \\\text { Research and development } & - 4 & - 5 \\\text { Depreciation and amortisation } & - 5 & - 5 \\\hline \text { Operating Income } & 23 & 21 \\\text { Other income } & 1 & 5 \\\hline \text { Earnings before interest } & & \\\text { and taxes (EBIT) } & 24 & 26 \\\text { Interest income (expense) } & - 7 & - 7 \\\hline \text { Pretax income } & 14 & 19 \\\text { Taxes } & - 4 & - 5 \\\hline \text { Net Income } & 10 & 14\end{array}\end{array}$
-Consider the above Income Statement for CharmCorp. All values are in millions of dollars. If CharmCorp has 6 million shares outstanding, and its managers and employees have stock options for 1 million shares, what is its diluted EPS in 2012?

• A) $2.33
• B) $1.42
• C) $1.67
• D) $2.00

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Definitions:

Business Cycle

The fluctuations in economic activity that an economy experiences over a period, characterized by periods of expansion and contraction.

Innovation Lag

The delay between the introduction of a new idea, process, or product and its acceptance or implementation in the market or society.

New Idea

A novel concept, thought, or innovation that has not been previously implemented or explored.

Consumer Demand

The desire and willingness of consumers to purchase goods and services at a given price.