Marion Company has 30,000 shares of common stock outstanding during all of 2019. This common stock has been selling at an average market price of $45 per share. Marion also has outstanding for the entire year compensatory share options to purchase 4,000 shares of common stock at $32 per share. The unrecognized compensation cost (net of tax) relating to these share options is $3 per share. During 2019, Marion earned income of $36,000 after income taxes of 30%. a) Compute Marion's 2019 diluted earnings per share. b) Assume Marion uses IFRS. Compute its earnings per share assuming IFRS is used.
Marion Company has 30,000 shares of common stock outstanding during all of 2019. This common stock has been selling at an average market price of $45 per share. Marion also has outstanding for the entire year compensatory share options to purchase 4,000 shares of common stock at $32 per share. The unrecognized compensation cost (net of tax) relating to these share options is $3 per share. During 2019, Marion earned income of $36,000 after income taxes of 30%.
a) Compute Marion's 2019 diluted earnings per share.
b) Assume Marion uses IFRS. Compute its earnings per share assuming IFRS is used.
The profit of a corporation is divided by the number of outstanding shares of its common stock to arrive at earnings per share (EPS). The resultant figure is used to gauge a company's profitability. It is typical for businesses to publish EPS that has been adjusted for unusual expenses and possible share dilution. The more lucrative a corporation is deemed to be, the greater its EPS. Because investors would pay more for a firm's shares if they believe the company has larger earnings relative to its share price, a higher EPS denotes more value. EPS may be calculated in a number of ways, such as on a diluted basis or without taking unusual items or ceased activities into account. Earnings per share, like other financial indicators, is most meaningful when compared to similar businesses, organizations in the same sector, or over time.
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