If Net Income Is $25,000 and There Were 18,000 Common

question 22

Multiple Choice

If net income is $25,000 and there were 18,000 common shares issued and outstanding the entire year, and 100 cumulative, nonconvertible, 6% $100 par preferred shares outstanding the entire year, what is EPS if no dividends were declared during the year.There are two years' dividends in arrears on the preferred shares.(Rounded to the nearest cent)

• A)$1.18
• B)$1.16
• C)$1.25
• D)$1.36
• E)$1.39

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Definitions:

Inventory Turnover

A measure of how quickly a company sells and replaces its stock of goods within a given time period.

Receivables Turnover

A measure of how efficiently a company collects on its credit sales, calculated as sales divided by average accounts receivable.

Return On Equity

A measure of a company's profitability, calculated by dividing net income by shareholder equity.

Du Pont Identity Method

The Du Pont Identity Method is a financial analysis framework that breaks down a company's return on equity into three parts: profitability, asset efficiency, and financial leverage.