EPS

Question 1

Formula for Basic EPS

Answer 1

Net Income - Preference Dividend
Divided by
Weighted Average Common Stock

** Preference dividend is deducted only for the calculation of Basic EPS

Question 2

Weighted Average number of Common Stocks Outstanding (WCSO) formula

Answer 2

Shares o/s at the beginning of the year
Add: Share sold / issued during the year (time weighted basis)
Less: Shares reacquired / purchased during the year (Treasury Stocks) (time weighted basis)
Add: Stock dividends and Stock Splits - retroactively adjusted
Less: Reverse stock splits - retroactively adjusted

Question 3

Diluted EPS formula

Answer 3

Net income available to common stockholders + Interest on Dilutive Securities
Divided by
Weighted Avg number all O/s shares - assuming conversion of all convertible securities into Common Stocks.

Question 4

Dilutive vs Anti-Dilutive EPS

Answer 4

Stock options, Warrants and other similar products are considered Dilutive ONLY when the Market Price of the Share is GREATER THAN Exercise Price of the Share.
If the exercise price is more than market price of the share, it is considered as Anti-Dilutive or Out of the Money.

Question 5

Formula to calculate additional number of Shares for Options / Warrants

Answer 5

Assuming Options / Warrants are Dilutive and In the Money, the conversion to Common Stock will happen by following formula -

Number of Shares - [No. of Shares * Exercise Price / Avg Market Price]