On January 1, 2014, Siena Corporation purchased 2,000 shares of treasury stock. Other information regarding Siena Corporation is provided below.
|
2013 |
2014 |
|
|
Net income |
$110,000 |
$110,000 |
|
Dividends on preferred stock |
$10,000 |
$10,000 |
|
Dividends on common stock |
$2,000 |
$1,600 |
|
Weighted-average number of shares outstanding |
10,000 |
8,000* |
|
Common stockholders” equity, beginning of year |
$500,000 |
$400,000* |
|
Common stockholders” equity, end of year |
$500,000 |
$400,000 |
Compute (a) return on common stockholders’ equity for each year and (b) earnings per share for each year, and (c) discuss the changes in each.
Determine return on common stockholders’ equity by dividing net income available to common stockholders by the average common stockholders’ equity.
Determine earnings per share by dividing net income available to common stockholders by the weighted-average number of common shares outstanding.