9/11/21, 7:11 PM
Chapter 3 Homework-Shalini Lakshmi
Instructor: Jim Lourentzos
Course: 4219-28564 PFS 803 FA21 Financial Mgt for
Professionals
Student: Shalini Lakshmi
Date: 9/11/21
Assignment: Chapter 3 Homework
(Working with the income​statement) If the Marifield Steel Fabrication Company earned $513,000 in net income and paid a cash dividend of $294,000 to its​
stockholders, what are the​firm's earnings per share if the firm has 107,000 shares of stock​outstanding?
STEP​1: Picture the problem
After completing the income statement the firm learns how much money it made during that period. ​However, the​firm's owners​(common stockholders) will want to know
how much income the firm made on a per share​basis, or what is called earnings per share.
STEP​2: Decide on a solution strategy
We can calculate earnings per share by dividing the​company's net income by the number of common shares it has outstanding.
STEP​3: Solve
The​company's earnings per share are given​by:
Earnings per share =
Net income
Shares outstanding
Earnings per share =
$513,000
= $4.79 per share
107,000 shares
STEP​4: Analyze
There are some important observations we can make about the Marifield Steel Fabrication​Company's performance. ​First, the firm is profitable since it earned net income
of $513,000 over the period in question. ​Second, the firm earned more net income ​($513,000​) than they distributed to their shareholders in dividends ​($294,000​). The
company earned $4.79 per share for each share that the shareholders hold.
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