Earnings per Share

Question 1

What EPS figures are disclosed?

Answer 1

basic and diluted. Basic EPS is the EPS based only on actual transactions for the year. Diluted EPS is a “worst-case” figure reflecting the potential dilution of stock options and convertible securities.

Question 2

What is basic EPS?

Answer 2

Includes only actual common shares outstanding.

BEPS = (net income) / (weighted average common shares outstanding)

BEPS = (net income - preferred stock dividend) / (weighted average common shares outstanding)

Question 3

What is diluted EPS?

Answer 3

Includes securities that may become common stock in the future, such as convertible stock and stock options, in addition to actual shares of common outstanding.

DEPS = (net income available to common adjusted for effects of PCS) / (weighted average common shares plus shares issuable from PCS)