Chapter 11, Problem 11.24EX

(a)

To determine

Earnings per share:

Earnings per share represent the amount of income earned per share of outstanding common stock in a period. This ratio is used for analyzing the profitability of company’s stockholders’.

The following formula can be used to calculate earnings per share:

$\text{Earnings per share}\text{= }\frac{\text{Net income}\left(\text{loss}\right)\text{ – Preferred dividends}}{\text{Average number of common shares outstanding}}$

To determine: The earnings per share of Company P for Year 3, Year 2, and Year 1.

(b)

To determine

To evaluate: The growth in earnings per share for 3 years in comparison to the growth in net income for the 3 years.