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Answers to supplementary objective test questions

CHAPTER 5 – EARNINGS PER SHARE

5.1 B

Basic earnings per share uses profit attributable to ordinary shareholders = PAT
– NCI’s share of profit – irredeemable preference dividends.

Profit after tax 12,000
NCI share of profit (1,620)
5% irredeemable preference share dividends (5% × 1,000) (50)
–––––––
Earnings attributable to ordinary shareholders 10,330

Redeemable preference dividends are treated as finance costs and are already
included within profit after tax.

5.2 C

Weighted average number of shares is given as:

b/f (000s) n/12 Bonus fraction Total (000s)
10,000 3/12 6/5.8 2,586
12,000 3/12 6/5.8 3,103

16,000 6/12 8,000
Weighted average number of ordinary shares 13,689

Bonus fraction is calculated as cum rights price/theoretical ex rights price.

CRP = 6

TERP = (1 × 5.2) + (3 × 6) = 23.2/4 = 5.8

Bonus fraction = 6/5.8

5.3 B

Adjusted comparative EPS = EPS × Inverted bonus fraction

= 1.56 × (5.8/6)

= 1.51

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