Indifference point
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
22 November 2011
it is stated that" indifference point is indeterminate when no. of shares are equal in ebit-eps analysis"
please explain whay is it so??
please explain whay is it so??
CA RICHA BADALIA
(Expert)
22 November 2011
Indifferent point/level is that EBIT level at which the Earnings Per Share (EPS) is the same for two alternative financial plans.
Formula is:
(EBIT-INT1)(1-tax)-Preference dividend/No.of shares=(EBIT-INT2)(1-tax)-preference dividend/No.of shares.
Now if you put on the figures in above formula keeping number of shares same on both side EBIT would be indeterminate.
Formula is:
(EBIT-INT1)(1-tax)-Preference dividend/No.of shares=(EBIT-INT2)(1-tax)-preference dividend/No.of shares.
Now if you put on the figures in above formula keeping number of shares same on both side EBIT would be indeterminate.
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