Earnings per Share

Question 1

What is simple capital structure?

Answer 1

Means that you have to show basic. You have no convertible debt into common stock.

Question 2

What is complex capital structure?

Answer 2

Means that you have to show basic and diluted eps. You have convertible debt into common stock.

Question 3

Where does basic and diluted per share amounts for income from continuing operations and for net income get shown?

Where does basic and diluted per share amounts of discontinued operations get shown?

Answer 3

Income from continuing operations and for net income get shown on FACE of income statement.

Discontinued operations get reported on EITHER FACE OR NOTES of income statement.

Question 4

What is basic EPS formula for simple capital structure (report basic eps only)

Answer 4

Basic EPS

Income available to common shareholders / Weighted-average number of common shares outstanding.

NET INCOME - PREFERRED DIVIDENDS / Weighted-average number of common shares outstanding.

Question 5

Is the preferred dividends amount that is being subtracted from net income in Basic EPS cumulative amount being subtracted or non-cumulative.

Answer 5

1) Subtract ONLY the non-cumulative preferred stock * NOT the amount that has been paid
2) Subtract only the dividends accumulated in the period on cumulative preferred stock (e.g. 10% 2000 share at $5 preferred)

Question 6

What type of stocks get retroactively adjusted (meaning they occurred in the beginning)

Answer 6

1) Stock Dividends

&

2) Stock Splits

Question 7

How to calculate WACSO?

Answer 7

Shares outstanding at beginning of period
+ Shares SOLD during period (time-weighted basis)
- Shares REACQUIRED during period (time-weighted basis)
+ Stock DIVIDENDS and Stock SPLITS (retro adjusted)
- REVERSE stock SPLITS (retro adjusted)