Question 2 Kismet plc is a listed company. One of the shareholders of the company, Mr OB who is your client currently, owns 250 shares in Kismet plc. Mr OB has recently received the published financial statements of Kismet plc for the year ended 31 December 2015. An extracts from these published financial statements include an income statement, and other relevant information which are given below. Mr OB is confused by the statements. He is unsure how the performance of the company during the year will affect the market value of his shares, but is aware that the published earnings per share (EPS) is often used by analysts in assessing the performance of listed companies. Extract from income statement-year ended 31 December 2014 E'000 8060 1460 6,600 (1,700) 2015 E'000 9,780 (1520 8,260 (2,160) Profit from operations Finance charge Profit before tax Taxation Profit after tax The following information is relevant: (i) On 1 January, 2014 the issued share capital of the company was 5,200,000 in 8% irredeemable preference shares of 1 each and 3,160,000 in ordinary shares of 50p each (ii) On 1 October 2014, the company made a rights issue of 45p ordinary shares in the proportion of 1 for every 5 shares held, at a price of E0.70. The market price for the share on the last day of quotation cum right was E0.90 per share (ii) On 1 June 2015 the company raised E3,750,000 from an issue of ordinary shares at full market value of 1.20 per share (iv) The company has paid the full preference dividend each year. Basic earnings per share for 2013 were 30.6p. Required (a) Calculate the EPS figures for disclosure in Kismet plc's financial statements for the year ended 31 December 2014 and 2015, including comparative figures. marks) 15 (b) Using the extracts, with which you have been provided, write a short report to Mr OB which identifies the key factors which have led to the change in the EPS of Kismet plc in the two comparative years. (5 marks) (c) Comment on the relevance of EPS calculations to investors (including Mr. OB) who may be (5 marks) (Total: 25 marks) concerned about the market value of the shares