Earning per share

Question 1

What is the Basic EPS formula

Answer 1

EPS = Income available to common share holders / WACSO

Income available to common share holders = (Net income - preferred stock dividends)

Question 2

How should cumulative preferred stocks be treated in the determination of basic EPS?

Answer 2

Cumulative preferred stocks should reduce net income IACSH for the dividend accumulated for that period.

Question 3

How should stock splits be considered in the calculation of Weighted average common shares?

Answer 3

Stock splits should be considered as if these stock were in the whole period.

Question 4

What is the Dilutive EPS Formula

Answer 4

Dilutive EPS = Income available to commo stock holders+ Interest on dilutive securities / WACSO (Assuming all dilutive securities are converted to common stock)

Question 5

What type of preferred dividends exists?

Answer 5

1. Cumulative
2. Non cumulative

Question 6

How do you calculate cumulative preferred dividends?

Answer 6

Cumulative Preferred dividends = Number of preferred shares * par value per share * price per share paid

Question 7

How do you calculate non-cumulative preferred dividends?

Answer 7

Its the amount declared and you will find it on statement of retained earnings

Question 8

When there is stock splits in the current year what happens with prior years EPS calculation?

Answer 8

Include the stock split as it would have happen also in prior year.