Earnings Per Share Flashcards
EPS
Earnings (PAT-NCI and Preference shares)/no. of shares in issue
Full Market Value EPS
Treat as whole year
Fraction existing shares, as well as new no. of shares to get full shares in issue
Bonus Issue
1 for 7= divide by 7*1
When comparing to prior year, reinstate the no. of shares to the new amount.
No need for table
Bonus Issue then rights issue
Use bonus fraction up until bonus is issued e.g. 1 for 5 is 6/5
Fractionate throughout the whole
Add up the to get number of shares
Rights issue
Calculate the Basic TERP. Price of existing shares is the market share shown in Q
Bonus fraction for Rights issue = Market price/TERP
The bonus fraction is used up until the issue (not including the issue)
Time fraction as per usual.
To get restated EPS for prior year, use the inverse of the TERP bonus fraction
Diluted EPS Importance
Importance is because EPS can be misleading e.g.
Convertible bonds are issued are converted into equity. The business will save on interest payments pushing up earnings, and the number of ordinary shares will increase more so and the correlated earnings and therefore is skewed
Diluted EPS How to:
Earnings (PAT) + notional interest on convertible loan notes, minus tax = Diluted earnings
To get shares from loan stock. 90 $1 shares for for $100 nominal. Take loan stock divide by 100*90. This gets diluted shares
Diluted earnings/diluted shares = diluted EPS
Options how to:
No. of options * (FV-PP)/FV gets no. of options.
Earnings stays the same
Earnings/ (Shares + options)
If Bonus issue is after market or rights issue
Use the bonus fraction for the O/B and after The market issue, but not past the bonus issue
TERP Remember
1 for 4 = 4 existing shares
Using bonus fractions for prior year restatement
Take prior year EPS and multiply by:
If rights issue it becomes TERP/MP
If bonus issue, a 1 for 5 will become 5/6 instead of 6/5
