EX 13-24 EPS

Procter & Gamble (P&G) is one of the largest consumer products companies in the world, famous for such brands as Crest® and Tide®. Financial information for the company for three recent years is as follows:


Fiscal Years Ended
(in millions)
2009 2008 2007
Net income $11,293 $11,798 $10,063
Preferred dividends $192 $176 $161
Average number of common shares outstanding 2,952 3,081 3,159


a. Determine the earnings per share for fiscal years 2009, 2008, and 2007. Round to the nearest cent.

b. Evaluate the growth in earnings per share for the three years in comparison to the growth in net income for the three years.


Answer:

a. Earnings per Share = Avg.Number of Common Shares Outstanding
Net Income − Preferred Dividends
 2009 Earnings per Share = 2,952 shares
$11,293 − $192
 = $3.76 per share
 2008 Earnings per Share = 3,081 shares
$11,798 − $176
 = $3.77 per share
 2007 Earnings per Share = 3,159 shares
$10,063 − $161
 = $3.13 per share
b. 2009 2008 2007
 Earnings per share .......................... $3.76 $3.77 $3.13
 As a percent of 2007 (base year).... 120% 120% 100%
 Net income ....................................... $11,293 $11,798 $10,063
 As a percent of 2005 (base year).... 112% 117% 100% 






The earnings per share growth for 2008 was slightly higher (120%) than the net income (117%) growth. While net income declined from 117% to 112% of the 2007 base year, earnings per share remained the same as 2008 (120%) of the base year. The number of common shares outstanding remained relatively the same during the three-year period.

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