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Flashcards in Earnings per share Deck (4)
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1

Basic EPS Formula

Earnings = Net Income - Preferred dividends

Basic EPS - Earnings / Weighted Ave CS

Preferred dividends - current year of cumulative whether declared or not plus current year of declared non-cumulative

2

If converted - Convertible Preferred Stocks

Compute basic EPS
Compute diluted EPS
Diluted EPS = Earnings + Preferred Dividends
__________________________
Weighted Ave CS + additional shares
if converted

Compare basic EPS vs. diluted
If diluted EPS < basic EPS - report diluted EPS

3

If converted - Convertible Bonds

Compute basic EPS
Compute diluted EPS
Diluted EPS = Earnings + Interest exp (net of tax)
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Weighted Ave CS + additional shares
if converted

Incremental share = interest exp (net)
----------------------
# of bond shares

if this is < than basic EPS then it is dilutive

4

Treasury Stock Method

1. compare average market price vs. exercise price

DILUTIVE IF EXERCISE PRICE IS

1. compare average market price vs. exercise price

DILUTIVE IF EXERCISE PRICE IS