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P/E ratio

This topic has 1 reply, 2 voices, and was last updated 5 years ago by P2-D2.

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June 2, 2019 at 5:56 pm #518427
star98
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Rite plc has issued share capital of $145000 comprising of 90000 equity shares of 50cents each and $100 000 10% redemeble preference shares. for the year ended 30 November 2015 profit before tax was $14 400 and profit after tax was $10 800on 30 November
2015, rite plc’s mid-market share equity share price was 84cents
What is the P/E ratio? Answer given in opentution chapter mcq’s is 7.00x..my question is why preference dividend is not deducted from earnings(10800-10000) while calculating EPS portion???
June 3, 2019 at 8:21 pm #518644
P2-D2
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You are given the earnings figure at 10,800 so this does not need adjusting. The dividend on the redeemable preference shares will already have been deducted. It only needs adjusting if there are irredeemable preference shares in issue.
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