Teleflex plc is a large multinational company in the power industry. The company needs to raise finance for expansion and is planning to raise this finance by listing and selling shares on the Stock Exchange. The finance director has asked for your assistance in preparing certain figures and reports for consideration by the management board.The extracts from Teleflex plc’s financial statements are shown below:Profit attributable to the ordinary shareholders for the year ended 31 March 2020 = £425,000 Number of ordinary shares in issue at 1 April 2019 = 4,000,000Teleflex plc issued one new share for every four existing shares held by way of a rights issue on 1 October 2019; the value of the rights was 50p per share on 1 October 2019. The share price before the issue was £1.00 per share.Required:With reference to IAS 33, Earnings per Share (EPS):a) Calculate the basic earnings per share to be reported in the financial statements of Teleflex Plc for the year ended 31 March 2020.EPS is generally regarded as a key accounting ratio for use by investors and others. Like all accounting ratios, however, it has its limitations.b) Discuss the limitations of EPS for investors who are comparing the EPS performance of different companies. c) Explain the importance of EPS as a performance measure.
Teleflex plc is a large multinational company in the power industry. The company needs to raise finance for expansion and is planning to raise this finance by listing and selling shares on the Stock Exchange. The finance director has asked for your assistance in preparing certain figures and reports for consideration by the management board.
The extracts from Teleflex plc’s financial statements are shown below:
Profit attributable to the ordinary shareholders for the year ended 31 March 2020 = £425,000
Number of ordinary shares in issue at 1 April 2019 = 4,000,000
Teleflex plc issued one new share for every four existing shares held by way of a rights issue on 1 October 2019; the value of the rights was 50p per share on 1 October 2019. The share price before the issue was £1.00 per share.
Required:
With reference to IAS 33, Earnings per Share (EPS):
a) Calculate the basic earnings per share to be reported in the financial statements of Teleflex Plc for the year ended 31 March 2020.
EPS is generally regarded as a key accounting ratio for use by investors and others. Like all accounting ratios, however, it has its limitations.
b) Discuss the limitations of EPS for investors who are comparing the EPS performance of different companies.
c) Explain the importance of EPS as a performance measure.
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