EPS

Question 1

Basic EPS Formula

Answer 1

= (NI - PS Dividends)/WACSO

P/s dividend=

1. Dividend declared if non cumulative
2. If cumulative - shares * par *%

Question 2

Simple vs Complex

Answer 2

Simple - CS only

Complex - more than cs (convertible)

Question 3

WASCO formula

Answer 3

Shares o/s * 12/12 (weight)
\+ shares sold 6/12
- shares reacquired  3/12
\+ stock dividend or split 12/12* retro 
-reverse stock

= wasco

Question 4

Convertible Securities

Answer 4

Options and warrants
Convertible p/s or bonds
Contract settled in stock
Contingent shares

Question 5

Diluted EPS Formula

Answer 5

[(NI - ps dividend)+interest in dilutive shares]/ wasco assuming all dilutive shares are converted

Question 6

Treasury stock method (dilutive effects, if option and warrants are converted uses this method)

Answer 6

This assumes that proceeds from exercising stock will be used to repurchase shares (treasury)

Question 7

Dilutive ve anti

Answer 7

Dilutive if average market price > strike it exercise price

In the money!

Question 8

option and warrants impact for diluted eps

Answer 8

Additional shares= number of shares - (number of shares x exercise)/divide by market price

No change to numerator
Add additional shares to denom

Question 9

Dilution from convertible securities (bonds ps)

Answer 9

Numerator - add interest expense saved net of tax
= expense * (1-tax)

Denominator add additional shares
If during period add to weighted calc

Question 10

Antidilution rule of conservatism

Answer 10

If raises eps wait till it occurs

Question 11

Dilution on convertible ps

Answer 11

Numerator - don’t subtract dividend (ps was converted)

Denominator - shares conversation

Question 12

Dilution from contract settle in cash or stock

Answer 12

Add shares if dulilutive

Same for contingent shares
If probable to happen in current year include in basic eps

Question 13

Disclosed on

Answer 13

Face of income statement