Table

As indicated, U.S. paid cash dividends of $103. The difference between net income and cash dividends, $309, is the addition to retained earnings for the year. This amount is added to the cumulative retained earnings account on the balance sheet. If you'll look back at the two balance sheets for U.S. Corporation, you'll see that retained earnings did go up by this amount: $1,320 + 309 = $1,629.

Calculating Earnings and Dividends per Share

Suppose that U.S. had 200 million shares outstanding at the end of 2002. Based on the income statement in Table 2.2, what was EPS? What were dividends per share?

From the income statement, we see that U.S. had a net income of $412 million for the year. Total dividends were $103 million. Because 200 million shares were outstanding, we can calculate earnings per share, or EPS, and dividends per share as follows:

Earnings per share

Dividends per share

Net income/Total shares outstanding $412/200 = $2.06 per share Total dividends/Total shares outstanding $103/200 = $.515 per share

When looking at an income statement, the financial manager needs to keep three things in mind: GAAP, cash versus noncash items, and time and costs.

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