Earnings Per Share Flashcards
What are the two basic measures of EPS?
Basic EPS and Diluted EPS
Basic EPS =
(NI - P Stock Divs) / WA shares of common stock outstanding
Common stock dividends effect EPS. TF
False
Diluted EPS is always going to be lower the Basic EPS. TF
True, because it includes more in the denominator
Diluted EPS =
(NI - P Stock Divs + Adj to Income for assumed conversion of potential common stock) / (WA of C Stock outstanding for period + Shares from assumed conversion of potential common stock)
BEPS and DEPS are shown on the face of the income statement for…
Income from continuing operations and NI
In calculation BEPS, only upon payment are PS divs subtracted from the numerator when the divs are cumulative. TF
False, one FULL YEAR (share x % x par) of cumulative PSDs are subtracted regardless of amount declared or paid.
Declared PSDs are subtracted from the BEPS numerator. TF
True
In calculation of BEPS, when dealing with cumulative PSDs only the declared portion in that CURRENT YEAR is subtracted from the numerator. TF
True
Stock divs AND stock splits are shown prospectively in regards to BEPS calculations. TF
False, you must RETROACTIVELY show the impact of the splits on BEPS for all periods shown
When calculating the WA shares outstanding (denominator BEPS), 300 shares issued on Jul 1 would equal how many shares?
300 x (6/12) = 150 Weighted Average Shares.
Regarding BEPS, if PSDs are cumulative always subtract, if not cumulative, subtract only what was declared. TF
True
Diluted EPS is an “as if “ calculation to see if the impact on EPS “if” ___________?
All potential conversions of stock were converted.
In comupation of DEPS, BEPS will not need to be computed. TF
False, BEPS is computed first, then changes in the numerator and denominator for assumed conversion and exercise of potential common stock.
Stock dividends are computed into the WA calculation as of the date declared. TF
False, they are outstanding as of the beginning of the year (the whole amount)
