Earnings per share

Question 1

What is the basic initial formula?

Answer 1

Profit/loss after tax / Weighted average shares

Question 2

Dividends - EPS

How does an ordinary dividend effect the earnings using in the initial formula?

Answer 2

Ignore, do not adjust.

Question 3

Dividends - EPS

How does an equity preference share (irredeemable) effect the earnings used in the initial formula?

Answer 3

Reduce profit for these before doing EPS.

Question 4

Dividends - EPS

How does a preference share effect the earnings used in the initial formula?

Answer 4

Ignore

Already included in the finance charge and therefore the profit figure.

Question 5

Weighted average - EPS

What are the steps?

Answer 5

Accumulatively time apportion the # of shares issued.

Question 6

Bonus issue - EPS

What is the formula?

Bonus formula

Answer 6

New number of shares
/
Old number of shares

e.g 1 for 5 bonus issue, top figure is 5, bottom figure is 1.

Question 7

Bonus issue - EPS

What is the process

Answer 7

Multiply previous weighted averages by the bonus formula.

Question 8

Rights issue - EPS

What is the Rights fraction?

Formula

Answer 8

Old market-value of shares
/
TERP

Question 9

Rights issue - EPS

How is TERP calculated?

Answer 9

No. shares before issue x share price = value
No shares issued in issue x issue price = cash generated
Sum of the above ** ……………. … …….Sum of the above**

e.g 1 for 10, top figure 10 bottom 1

Then the sum of the above gets put into a fraction, which is TERP.

Question 10

Rights issue - EPS

How is a prior year bonus issue accounted for?

Answer 10

Simply turn the rights issue fraction upside down.