EPS

Question 1

Who must disclose EPS

Answer 1

Public entities

Question 2

Basic EPS

Answer 2

Net earnings available to common shareholders / WACSO

Question 3

Net earnings available to common shareholders

Answer 3

Net income after tax - dividends to preferred shares

Cumulative: even if not declared
Non cumulative: only if declared

Question 4

WACSO

Answer 4

DATE- ACTIVITY -SHARE O/S -ADJ FACTOR- FRACTION OF YEAR - WACSO

Question 5

Adjustment factor for WACSO

Answer 5

Affects everything prior. Even if after year end.

ex 20% stock dividend … all prior = 1.2

Question 6

Diluted EPS

Answer 6

Net earnings available to common - income effect of dilutive / PCS

Question 7

PCS

Answer 7

Financial instruments convertible into common shares

Question 8

Calculate incremental

Answer 8

Income impacts of PCS / Share impact of PCS

1. Income impact - AFTER TAX FOR BONDS ONLY change in income if the PCS are converted to common shares ie interest don’t have to pay on bonds or dividends don’t have to pay (Income effect x after tax rate)

Note: preferred shares for non cumulative is only if declared

2. Share impact - # of additional common shares

Question 9

If Incremental is more than basic EPS

Answer 9

antidilutive. And dilutive = basic

Question 10

Provisional EPS

Answer 10

Add the income effect to the top and the share effect to the bottom and recalc EPS

Question 11

If doing several PCS calculation of EPS

Answer 11

do lowest incremental first

Question 12

Stock options

Answer 12

Have a nil effect on income

Question 13

Timing of incremental

Answer 13

Weighted based on date of issue