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Finra Series-7 Exam - Topic 2 Question 53 Discussion

Bubba Corporation has net income of $4,200,000. It has 100,000 outstanding shares of 8% preferred stock ($100 par value) and 400,000 shares of common stock ($10 par value).What are the earnings per share of common stock?
A) $8.50
B) $6.00
C) $4.20
D) $10.50

Finra Series-7 Exam - Topic 2 Question 53 Discussion

Actual exam question for Finra's Series-7 exam
Question #: 53
Topic #: 2
[All Series-7 Questions]

Bubba Corporation has net income of $4,200,000. It has 100,000 outstanding shares of 8% preferred stock ($100 par value) and 400,000 shares of common stock ($10 par value).

What are the earnings per share of common stock?

Show Suggested Answer Hide Answer
Suggested Answer: A

$8.50. Subtract the preferred dividend of $800,000 (100,000 x 8% x 100) from the net income. Divide the result of $3,400,000 ($4,200,000 - $800,000) by the 400,000 common shares to obtain $8.50.


by Christiane at Jun 17, 2022, 07:26 AM

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Margurite
10 months ago
Totally agree, $6.00 makes sense!
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Irene
10 months ago
Wait, how do we know the preferred dividends are calculated correctly?
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Serina
10 months ago
I think it’s $6.00, seems right to me.
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Kiley
11 months ago
Gotta subtract the preferred dividends first!
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Billye
11 months ago
Net income is $4.2 million, and there are 400k common shares.
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Tegan
11 months ago
I’m a bit confused about the preferred stock part. Do we just multiply the par value by the dividend rate to find the total preferred dividends?
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Emerson
11 months ago
This question feels similar to one we practiced where we had to adjust net income for preferred stock. I hope I remember the formula correctly!
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Omega
11 months ago
I think we need to subtract the preferred dividends from the net income before calculating the EPS for common stock.
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Penney
11 months ago
I remember we calculated earnings per share in class, but I'm not sure how to account for the preferred dividends here.
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Tammy
11 months ago
Ah, I think I see the problem. The code is trying to use a variable that hasn't been declared. That would likely cause an error on one of the lines. I'll mark my answer accordingly.
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Linwood
11 months ago
Hmm, I'm a bit unsure about this one. There are a few different options presented, and I want to make sure I select the right ones. I'll need to carefully review the routing table and the command options.
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Devora
11 months ago
Okay, I've got this. The key is that the question is asking about reducing time and effort to create a product specification, so the answer has to be something that already exists and can be reused. That points to A - requirements.
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Nickolas
11 months ago
I think the answer is A. The SIP Server in standalone mode would be responsible for managing the persistent registrar data.
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