EPS Quiz 2

When a company makes a bonus issue:

• The previous year's EPS is not adjusted for the issue

• The previous year's EPS is adjusted for the issue

• Only a note of the effect on the previous year's EPS is made

• A bonus issue of shares is financed from the spare cash that a company has

The information relates to pepper plc which has a year end of 30 June. On 1 July 2016, Pepper plc made a bonus issue of one share for every four held. What is the basic earnings per share for 30 June 2017 including the 2016 comparative?

• 2017 EPS 1,359.4p, Comparative year 2016 EPS 2,298.5p

• 2017 EPS 1,698.8p, Comparative year 2016 EPS 2,298.5p

• 2017 EPS 1,700.0p, Comparative year 2016 EPS 2,300.0p

• 2017 EPS 1,698.8p, Comparative year 2016 EPS 1838.8p

A company has 1,200,000 £1 equity shares in issue at the start of the year. A bonus issue of 300,000 shares was made six months into the year. The earnings figure for the current year was £600,000 and £450,000 for the prior year.

• Current year EPS 40.0p, Prior year comparative EPS 37.5p

• Current year EPS 50.0p, Prior year comparative EPS 37.5p

• Current year EPS 40.0p, Prior year comparative EPS 30.0p

• Current year EPS 66.7p, Prior year comparative EPS 37.5p

Prior year's EPS is adjusted for a bonus issue but is not adjusted for an issue at full market value because bonus issue raises no cash so you would not expect extra profit from the share issue.

• True

• False

A bonus issue of shares is financed from the spare cash that a company has

• True

• False