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CA Intermediate · Advanced Accounting · AS 20 Earnings Per Share

Narmada Engineering Ltd earned a net profit of ₹24,00,000 for the year ended 31 March 2026. It had 3,00,000 equity shares on 1 April 2025. It issued 1,20,000 shares at full market price on 1 July 2025 and bought back 60,000 shares on 1 January 2026. What is the basic EPS, rounded to two decimals?

Basic EPS is ₹6.40. The weighted average number of shares is 3,75,000, found by adding nine months of the 1,20,000 new shares and removing three months of the 60,000 bought back shares. Profit of ₹24,00,000 is divided by this figure.

  1. A₹6.15
  2. B₹6.67
  3. C₹6.40Correct
  4. D₹5.71

Explanation

Weighted average shares = 3,00,000 + 1,20,000 × 9/12 − 60,000 × 3/12 = 3,00,000 + 90,000 − 15,000 = 3,75,000. EPS = 24,00,000 / 3,75,000 = ₹6.40. ₹6.15 ignores the buyback in the weighting, and ₹6.67 uses the year-end share count of 3,60,000.

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