Use the Table for the Question(s) Below -Refer to the Income Statement Above

question 40

Multiple Choice

Use the table for the question(s) below.
$\begin{array} { c } \text { Luther Corporation }\\ \text { Consolidated Income Statement }\\ \text { Year ended June 30 (in \$ millions) }\\\begin{array} { lll }&2012&2011\\\hline \text { Total sales } & 610.1 & 578.3 \\\hline \text { Cost of sales } & (500.2) & (481.9) \\\hline \text { Gross profit } & 109.9 & 96.4 \\\hline \text { Selling, general, and } & \\\text { administrative expenses } & (40.5) & (39.0) \\\hline \text { Research and development } & (24.6) & (22.8) \\\hline \text { Depreciation and amortisation } & (3.6) & (3.3) \\\hline \text { Operating income } & 41.2 & 31.3 \\\hline \text { Other income } & --- & -- \\\hline \text { Earnings before interest and taxes (EBIT) } & 41.2 & 31.3 \\\hline \text { Interest income (expense) } & (25.1) & (15.8) \\\hline \text { Pretax income } & 16.1 & 15.5 \\\hline \text { Taxes } & (5.5) & (5.3) \\\hline \text { Net income } & 10.6 & 10.2 \\\hline\\\hline \text { Price per share } & \$ 16 & \$ 15 \\\hline \text { Shares outstanding (millions) } & 10.2 & 8.0 \\\hline \text { Share options outstanding (millions) } & 0.3 & 0.2 \\\hline\\\hline \text { Shareholders' Equity } & 126.6 & 63.6 \\\hline \text { Total Liabilities and Shareholders' Equity } & 533.1 & 386.7 \\\hline\end{array}\end{array}$

-Refer to the income statement above. For the year ending 30 June 2012, Luther's earnings per share are closest to:

• A) $1.58
• B) $4.04
• C) $1.01
• D) $1.04

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Definitions:

Negotiated Transfer Price

A transfer price agreed upon by the selling and buying divisions within the same company.

External Market Price

The price at which goods or services are bought and sold outside of a company, determined by the supply and demand in the wider market.

Savings

The portion of income not spent on current expenditures or taxes, often set aside for future use or investment.

Excess Capacity

A scenario where a company's production facilities are capable of producing more than is needed to meet the demand.