This document provides examples and explanations for calculating book value per share and earnings per share. It defines book value per share as the portion of total shareholders' equity assigned to each ordinary outstanding share, and is calculated by dividing total shareholders' equity by the number of ordinary shares outstanding. Earnings per share is defined as the amount of earnings attributable to each ordinary share, and is calculated as net income after tax divided by the average outstanding ordinary shares. The document provides sample calculations and questions to help understand these concepts.
This document provides examples and explanations for calculating book value per share and earnings per share. It defines book value per share as the portion of total shareholders' equity assigned to each ordinary outstanding share, and is calculated by dividing total shareholders' equity by the number of ordinary shares outstanding. Earnings per share is defined as the amount of earnings attributable to each ordinary share, and is calculated as net income after tax divided by the average outstanding ordinary shares. The document provides sample calculations and questions to help understand these concepts.
This document provides examples and explanations for calculating book value per share and earnings per share. It defines book value per share as the portion of total shareholders' equity assigned to each ordinary outstanding share, and is calculated by dividing total shareholders' equity by the number of ordinary shares outstanding. Earnings per share is defined as the amount of earnings attributable to each ordinary share, and is calculated as net income after tax divided by the average outstanding ordinary shares. The document provides sample calculations and questions to help understand these concepts.
1. What is the significance of book value per share? Book value per share is the portion of the total stockholders equity assigned to each ordinary outstanding share. For investment purposes, the book value per share is useful in relation to market value per share to evaluate the attractiveness of the equity shares. 2. Basic formula in computing Book value per share = total shareholders equity (SHE) Number of ordinary shares outstanding 3. No. We do not compute book value per share for preference shares. Where there are two classes of share capital (preference and ordinary), the equity of preference shares is first deducted as follows: Total shareholders equity Pxxx Less: Equity of preference shares xxx -----Ordinary shares equity Pxxx ==== 4. Earnings per share (EPS) is the amount of earnings attributable to each ordinary share. It provides a measure of the interests of each ordinary share in the performance of the entity over the reporting period. 5. EPS = Net income after tax / Average outstanding ordinary shares 6. The EPS is not computed for preference shares because EPS pertains more to ordinary shares since preference shares earn a fixed rate of return on their par value. 10-2 TRUE OR FALSE. 1. False 2. True 3. False. SHE / ordinary shares outstanding 4. True 5. False. Only EPS 6. False 7. False. Ordinary shares outstanding as at balance sheet date. 8. False. Only publicly held entities are required. 9. False. A measure of companys performance expressed on a per share basis. 10.False. A measure of companys financial position expressed on a per share basis. 10-3 Computation of Book value per share (BVS). 1. SHE = 2,500,000 + 500,000 + 750,000 + 250,000 = 4,000,000 2. OUTSTANDING SHARES = 2,500,000/100 = 25,000
3. Book value per share = 4,000,000 / 25,000 = P160.00
4. Yes. Because BVS is higher than par by 60%. 10-4 computation of BVS 1. 2. 3. 4.