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CA Intermediate · Advanced Accounting · AS 20 Earnings Per Share

Narmada Engineering Ltd had 6,00,000 equity shares on 1 April 2025. On 1 July 2025 it issued 2,00,000 shares at full market price for cash. On 1 January 2026 it bought back and cancelled 1,00,000 shares. Net profit for equity shareholders for the year ended 31 March 2026 is ₹29,00,000. What is the basic EPS?

Basic EPS is ₹4.00. The weighted average shares are 6,00,000 plus 1,50,000 for the nine-month issue, less 25,000 for the buyback outstanding effect over three months, giving 7,25,000. Dividing ₹29,00,000 by 7,25,000 gives ₹4.00.

  1. A₹4.00Correct
  2. B₹3.87
  3. C₹3.63
  4. D₹4.14

Explanation

Weighted shares = 6,00,000 + 2,00,000 × 9/12 − 1,00,000 × 3/12 = 6,00,000 + 1,50,000 − 25,000 = 7,25,000. EPS = 29,00,000 / 7,25,000 = ₹4.00. ₹3.87 ignores the buyback (7,50,000 shares). ₹3.63 counts the new issue for the full year without the buyback (8,00,000 shares).

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