Ch 7 Flashcards
Formula for Basic EPS
Basic EPS = Income available to common shareholders / Weighted average # of common shares outstanding
What is Wasco
WACSO = shares outstanding at the beginning (+) shares sold (-) shares reacquired } time-weighted
(+) stock dividends & splits (-) reverse stock splits } retroactively adjusted incl prior year
What is a complex capital structure
securities that could be converted to common stick like preferred stock,warranties, options
What is the formula for diluted EPS
Diluted EPS= (Income available to the common shareholders + interest saved on dilutive securities)/ WACSO
How do you calculate dilutions from options and warrants
How do you calculate dilutions from preferred stocks
Add to numerator: add back preferred;
Add to denominator: WACSO Δ & stock issued on conversion date
How do you calculate dilutions from convertible bonds
Add to numerator: interest expense net of tax; Add to denominator: WACSO Δ; stock issued on conversion date
- Interest expense = coupon rate x face value + discount amortization
How does the anti dilution rule play into EPS
you only report diluted EPS if the diluted EPS is lower than basic. You compare on a one by one basis
What are the items to adjust for the indirect method for the operating section
What are the items to adjust for the direct method for the operating section
What are the items to adjust for the investing section for stmt of cash flows
Investing
- (-/+) All principals lent and/or repaid
- (-) Purchase of non-current assets
- (+) Sale of non-current assets
What are the items to adjust for the financing section for stmt of cash flows
Financing
- (+/-) All principals borrowed and/or repaid
- (+) Issuance of stock
(-) Repurchase of stock
- (-) Dividends paid
