How to calculate earning per share?

Calculate earning per Share?

• The question is the if securities outstanding are: 1,000,000 shares of common stock 200,000 shares of $2.50 (annual dividend) perferred stock 10,000,000 of 15% bonds Calculate earnings per share available to common stockholders if the company earns $5,000,000

• Answer:

  From the $5,000,000 you first deduct $500,000 for the preferred stock dividend and $1,500,000 for the interest on the bonds. That leaves $3,000,000 for the common stockholders. Since 1,000,000 shares of common are outstanding, that allows for a common stock dividend of $3.00 per share.