Plan APlan BCommon stockRs. 2000000Rs.500000Preferred stockRs.150000Rs.90000Long term debtRs.250000Rs.8000000Using EBIT-EPS approach, calculate EBIT.SolutionThe solution is given below −            (EBIT – In(a)) (1-T) – Pd(a) / OSa = (EBIT – In(b)) (1-T) – Pd(b)) / OSbL.H.S.EBIT = Earnings before interest and tax, In(a) = 250000 * 9% ... Read More

Before going for Earnings before interest and tax (EBIT) – Earnings per share (EPS) approach, let us discuss briefly about EBIT and EPS.With the help of Earnings before interest and tax (EBIT), investors and managers can analyse company’s performance without considering balance sheet.With the help of Earnings per share (EPS), ... Read More

DateParticularsPurchaseSellRemaining01.04.XXXXTotal shares2000001.10.XXXXPreference share is converted to equity share45002450001.01.XXXXShares buyback200022500Considering above data and table. Calculate EPSSolutionThe solution is given below −             EPS = (P-Pd) / WACSCalculating Profits minus preference shares (P-Pd).P – Pd = profit before tax – profit after tax rate – preference share dividendsP ... Read More

Earnings per Share (EPS) are a financial measure that tells about net earnings of a shareholder over a period. In other words, EPS is part of profit distributed to the shareholder. EPS tells whether company can produce net profit for shareholders.It tells about financial health of a company. If EPS ... Read More

SolutionThe solution is explained below −      EBITDA = Np+In+Ta+D+A    EBITDA = 175000+20000+35000+8000       EBITDA= 238000/-Here, Np=Net Profit, In=Interest, Ta=Taxes, D = Depreciation, A= Amortization      EBITDA= OI*+ D+ A    EBITDA = (525000-200000-95000) + 8000       EBITDA = 238000/-Here, OI* = Operating ... Read More

EBITDA means Earnings before interest taxes depreciation and amortizations. EBITDA focus on operating decisions of a business by excluding non-operating decisions.Profitability between companies/industries can analysed by using EBITDA. A positive EBITDA means company is getting profits through its operations and a negative EBITDA means company is not getting profits through ... Read More

Earnings before Interest and Tax (EBIT) tell about profitability of a company. It tells about company’s core operation performance. Companies profit includes incomes, expenses.Sometimes EBIT is the amount which deducts all operating expenses from sales revenue, which is called operating income. EBIT is the amount generated in a particular accounting ... Read More

The word trading means profit earning and equity means owner’s money. In other words, trade of equity means profit is earned through owner’s money. Company will go for trade on equity, when it needs new debt to gain or acquire new assets on which, it can earn high return as ... Read More

The major differences between Earnings per share (EPS) and dilute Earnings per share (D-EPS) are as follows −Earnings per share (EPS)Dilute Earnings per share (D-EPS)Basic earnings per equity share of a company is calculated.Calculates earnings per convertible share of a company.Main purpose is to calculate profitability of a company.Main purpose ... Read More

Rs.Sales (S)1000000Variable cost (VC)375000Fixed cost (FC)95000Debt425000Interest on debt10%Equity capital590000SolutionThe solution is given below −return on investment = EBIT/ (D + E) return on investment = (S – VC – FC)/ (D + E) return on investment = (1000000 – 375000 – 95000)/ (425000 + 590000) return on investment = 530000/ 1015000 return on investment ... Read More