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    Financial Ratios - Basic Earnings Per Share: Bonds Fixed Income

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    Bhaskar Mukherjee
    Basic earnings per share (EPS) is calculated by taking the net income attributable to common shareholders and dividing it by the weighted average number of shares outstanding. For companies with a simple capital structure that does not include potential dilutive securities, only basic EPS needs to be reported. For companies with a complex capital structure that includes dilutive securities like warrants or convertible debt, both basic EPS and fully diluted EPS must be reported, with basic EPS always being higher since it does not account for dilution from other securities. Basic EPS is calculated by taking net income minus preferred dividends and dividing by the weighted average number of shares, which takes into account the number of shares outstanding each month weighted by the number of months held.

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    Financial Ratios - Basic Earnings Per Share: Bonds Fixed Income

    Uploaded by

    Bhaskar Mukherjee
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    Basic earnings per share (EPS) is calculated by taking the net income attributable to common shareholders and dividing it by the weighted average number of shares outstanding. For companies with a simple capital structure that does not include potential dilutive securities, only basic EPS needs to be reported. For companies with a complex capital structure that includes dilutive securities like warrants or convertible debt, both basic EPS and fully diluted EPS must be reported, with basic EPS always being higher since it does not account for dilution from other securities. Basic EPS is calculated by taking net income minus preferred dividends and dividing by the weighted average number of shares, which takes into account the number of shares outstanding each month weighted by the number of months held.

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    Basic earnings per share (EPS) is calculated by taking the net income attributable to common shareholders and dividing it by the weighted average number of shares outstanding. For companies with a simple capital structure that does not include potential dilutive securities, only basic EPS needs to be reported. For companies with a complex capital structure that includes dilutive securities like warrants or convertible debt, both basic EPS and fully diluted EPS must be reported, with basic EPS always being higher since it does not account for dilution from other securities. Basic EPS is calculated by taking net income minus preferred dividends and dividing by the weighted average number of shares, which takes into account the number of shares outstanding each month weighted by the number of months held.

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    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    35 views1 page

    Financial Ratios - Basic Earnings Per Share: Bonds Fixed Income

    Uploaded by

    Bhaskar Mukherjee
    Basic earnings per share (EPS) is calculated by taking the net income attributable to common shareholders and dividing it by the weighted average number of shares outstanding. For companies with a simple capital structure that does not include potential dilutive securities, only basic EPS needs to be reported. For companies with a complex capital structure that includes dilutive securities like warrants or convertible debt, both basic EPS and fully diluted EPS must be reported, with basic EPS always being higher since it does not account for dilution from other securities. Basic EPS is calculated by taking net income minus preferred dividends and dividing by the weighted average number of shares, which takes into account the number of shares outstanding each month weighted by the number of months held.

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    Investopedia

    http://www.investopedia.com/university/ViewEPWPrintable.aspx?url=...

    Financial Ratios - Basic Earnings Per Share


    Filed Under Bonds, Fixed Income I. Introduction Simple and Complex Capital Structures A simple capital structure is one that contains no potential dilutive securities. A company with a simple structure will have only common stockholders, preferred stockholders and nonconvertible debt. Companies with simple capital structures only need to report basic EPS. A complex structure refers to one that contains potential dilutive securities. A company with a complex structure in addition to what is included in a company's simple capital structure will also include warrants and/or options and/or convertible debt instruments. - Companies that have a complex capital structure must report earnings per share (EPS) on a basic and fully diluted basis. EPS is simply the net income that is attributable to common shareholders divided by the number of shares outstanding. If a company has a complex capital structure, it means that a portion of their dilutive securities may be converted to equity at some point in time. Since EPS basic does not take into account these dilutive securities, EPS basic will always be greater than EPS fully diluted. Basic Earnings Per Share (EPS) EPS basic does not consider potential dilutive securities. A company with a simple capital structure will calculate only a basic EPS, which is defined as: Formula 7.45

    Basic EPS = (net income - preferred dividends)_____ weighted average number of shares outstanding

    Since we are interested only in the net income that belongs to common stockholders, preferred dividends are subtracted. Dividends, whether paid in cash or stock, or the additional dividend that is attributable to participating preferred shares must also be deducted. Note: - Dividends declared to common stockholders are not subtracted from ESP as they belong to common stockholders. - Preferred stock dividends are the current year's dividend only. (a) If none are declared, then calculate an amount equal to what the current dividend would have been. (b) Don't include dividends in arrears. (c) If a net loss occurs, add the preferred dividend. - EPS is calculated for each component of income: income from continuing operations, income before extraordinary items or changes in accounting principle, and net income. Calculating the Weighted Average Number of Shares Outstanding The weighted average number of shares outstanding (WASO) is: Formula 7.46 The # of shares outstanding during each month, weighted by the # of months those shares were outstanding. Included are the impacts of all stock dividends and stock splits effective during the period and those announced after the end of the reporting period but before the financial statements are issued. Furthermore, all prior periods must be restated to facilitate comparative analysis. by

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