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Academy Driving School reported the following amounts in its financial statements:

Year 1 Year 2
Number of common shares 11,700 11,700
Net income $ 25,740 $ 20,740
Cash dividends paid on common stock $ 3,200 $ 3,200
Total stockholders' equity $ 260,000 $ 240,000


Calculate EPS and ROE for Year 2.

Sagot :

The EPS for Year 2 is $1.77 and the ROE for Year 2 is 8.64% for Academy Driving School.

What is EPS and ROE?

The earning per share is amount that will be earned by the share holders from the net income on per share. While the ROE is the return each shareholder will get the total amount of equity engaged in the net income earned by the company in a particular year.

Computation of EPS:

[tex]\begin{aligned}\text{EPS}&=\dfrac{\text{Net Income}}{\text{Number of Common Shares}}\\&=\dfrac{\$20,740}{\$11,700}\\&=\$1.77\end{aligned}[/tex]

Computation of ROE:

[tex]\begin{aligned}\text{ROE}&=\dfrac{\text{Net Income}}{\text{Shareholders' Equity}}\times100\\&=\dfrac{\$20,740}{\$240,000}\times100\\&=8.64\%\end{aligned}[/tex]

Therefore, for Year 2 the EPS is $1.77 and ROE is 8.64%.

Learn more about ROE and EPS, here:

https://brainly.com/question/17244653

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