alleryStart learning →A bakery earned a net profit of $32,175 and has 10,000 shares of common stock outstanding. What are its earnings per share?
A$32.18
B$3.22
C$0.32
D$3.92
Answer & Solution
Correct answer: B. $3.22
1. Earnings per share divides net profit by the number of shares of common stock outstanding.
2. Net profit is $32,175.
3. Shares outstanding number 10,000.
4. Divide: $32,175 divided by 10,000 equals $3.2175.
5. Rounded to cents, earnings per share are $3.22.
6. Answering $32.18 divides by 1,000 shares instead of 10,000, slipping one decimal place.
7. Answering $0.32 divides by 100,000 shares, slipping the same decimal place the other way.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 14 "Using Financial Information and Accounting", section 14.7 Analyzing Financial Statements_
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