Chapter 13, Problem 13.8BPE

(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:

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

The earnings per share of Incorporation BB for the year ended December 31, 2016 and 2015.

(b)

To determine

To identify: Whether the change in the earnings per share of Incorporation BB from 2016 to 2015 indicates a favorable or unfavorable trend.