Answered

Discover the answers you need at Westonci.ca, a dynamic Q&A platform where knowledge is shared freely by a community of experts. Get precise and detailed answers to your questions from a knowledgeable community of experts on our Q&A platform. Discover in-depth answers to your questions from a wide network of professionals on our user-friendly Q&A platform.

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

#SPJ1

Thank you for your visit. We're committed to providing you with the best information available. Return anytime for more. We hope our answers were useful. Return anytime for more information and answers to any other questions you have. Get the answers you need at Westonci.ca. Stay informed by returning for our latest expert advice.