Use the following information to answer the questions: Assets Liabilities and Equity
Cash 14,000 Accounts payable 17,000
Marketable securities 4,000 Notes payable 8,000
Accounts receivable 10,000 Current liabilities 25,000
Inventory 39,000 Long-term debt 80,000
Current assets 67,000 Total liabilities 105,000
Machines 42,000 Paid-in capital 30,000
Real estate 60,000 Retained earnings 34,000
Net fixed assets 102,000 Equity 64,000
Total assets 169,000 Total liab. & equity 169,000

Sales 330,000
Operating expenses 297,000
Depreciation 25,000
EBIT 8,000
Interest 5,000
Taxable income 3,000
Taxes 990
Net income 2010

There are 8,200 shares outstanding, each currently trading for $5.65.
Required:
a. What are earnings per share?
b. What is the book value per share?

a. Earnings per share = $0.25

b. The book value per share = $7.80

Explanation:

Balance Sheet

Assets                                        Liabilities and Equity

Cash                           14,000    Accounts payable         17,000

Marketable securities 4,000    Notes payable               8,000

Accounts receivable 10,000    Current liabilities         25,000

Inventory                  39,000     Long-term debt          80,000

Current assets         67,000     Total liabilities           105,000

Machines                 42,000      Paid-in capital            30,000

Real estate              60,000      Retained earnings     34,000

Net fixed assets    102,000       Equity                        64,000

Total assets          169,000        Total liab. & equity  169,000

Income Statement

Sales                           330,000

Operating expenses 297,000

Depreciation                25,000

EBIT                                8,000

Interest                          5,000

Taxable income            3,000

Taxes                               990

Net income                   2,010

Outstanding shares = 8,200

Market price of shares = $5.65

Earnings per share = 2,010/8,200 = $0.25

Book value per share = (Assets - Liabilities)Equity/8,200

= ($169,000 - 105,000)/8,200 = $7.80

b) The earnings per share is a financial measure of the how much is generated in net income for each share.  The book value per share measures the equity value per share.

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