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The following information is extracted from the financial statements of Halifax Group (Halifax) for the year ended 31 December 2017: $000 $000 Profit before tax

The following information is extracted from the financial statements of Halifax Group (Halifax) for the year ended 31 December 2017:

$000

$000

Profit before tax

4,131

Tax

(1,629)

Net profit

2,502

Profit attributable to: Shareholders of Halifax

2,412

Non-controlling interest

90

2,502

Retained profits at 1 January 2017

5,268

Profit for the year

2,412

Dividends:

Preference dividends

(45)

Ordinary dividends

(669)

(714)

Retained profits at 31 December 2017

6,966

From 1 January 2017 until 31 March 2017 the share capital of Halifax consisted of 12 million ordinary shares and 900,000 $0.5 preference shares.

On 1 September 2017 warrants were issued to existing shareholders on a 1 to 1 basis. Every warrant gave the right to subscribe for 1 ordinary share on 31 December 2019 at a price of $1 for each share. The average market price of the Halifaxs share was $2.0 for 2017.

Required:

(a)

Determine the basic earnings per share of Halifax for the year ended 31 December 2017.

(9 marks)

(b)

Determine the diluted earnings per share of Halifax for the year ended 31 December 2017.

(6 marks)

(c)

Identify the limitations of earnings per share as a profitability measure.

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