842:
outstanding, and $ 1,000,000 of 10% bonds, convertible into 50,000 shares of common stock. Company A's tax rate is 25%. Basic EPS = ($ 2,000,000 - ($ 1,000,000*10%))/50,000 = $ 38 Diluted EPS = ($ 2,000,000 + (25%*($ 1,000,000*10%))) / 50,000 + 50,000 = $ 20.25 Note that other than accounting for the shares of common stock added in the denominator of the EPS equation, we also add back the taxes that would have been taken out from Net income if the bonds were not converted. In conclusion, the "as if" method is helpful in considering the effect on dilutive instruments on EPS because it helps us think about the overall effect rather than just thinking about the numerator and denominator of the equation separately.
47:
841:
As mentioned above, a helpful way to consider the effect of dilutive instruments on EPS is to think about the "as if" method; in the sense that "if the instrument is converted, how does it affect EPS?" For example, let
Campany XYZ have Net Income = $ 2,000,000, there are 50,000 shares of common stock
800:
are described under
Statement No. 128 of the Financial Accounting Standards Board (FAS No. 128). The objective of diluted EPS is to measure the performance of a company over the reporting period taking into account the dilutive effect of potential common stock that could be issued by the company. To
668:
rights have precedence over common stock. Therefore, dividends on preferred shares are subtracted before calculating the EPS. When preferred shares are cumulative (i.e. dividends accumulate as payable if unpaid in the given accounting year), annual dividends are deducted whether or not they have been
837:
The numerator used in calculating diluted EPS is adjusted to take into account the impact that the conversion of any securities would have on earnings. For example, interest would be added back to earnings to reflect the conversion of any outstanding convertible bonds, preferred dividends would be
787:
of common stock shares outstanding over the past year; this is adjusted for dilutive shares. Some data sources may simplify this calculation by using the number of shares outstanding at the end of a reporting period. The methods of simplifying EPS calculations and eliminating inappropriate
788:
assumptions include replacing primary EPS with basic EPS, eliminating the treasury stock method of accounting from fully diluted EPS, eliminating the three-percent test for dual presentation, and providing information on individual dilative securities.
807:
To calculate the total number of shares used in the calculation, FASB prescribes using the treasury method to calculate the dilutive effect of any instruments that could result in the issuance of shares, including:
899:
The differences that remain are the result of differences in the application of the treasury stock method, the treatment of contracts that may be settled in shares or cash, and contingently issuable shares.
896:
The earnings per share requirements of U.S. GAAP, FASB ASC 260: EPS, are a result of the FASB's cooperation with the IASB to narrow the difference between IFRS and US GAAP. A few differences remain.
771:). Diluted EPS indicates a "worst case" scenario, one that reflects the issuance of stock for all outstanding options, warrants and convertible securities that would reduce earnings per share.
1190:
1082:
838:
added back to reflect the conversion of convertible preferred stock, and any impact of these changes on other financial items, such as royalties and taxes, would also be adjusted.
943:
1183:
1409:
797:
1176:
854:, diluted earnings per share is calculated by adjusting the earnings and number of shares for the effects of dilutive options and other dilutive potential
1404:
1239:
1442:
1199:
851:
311:
1010:
981:
1371:
1223:
1168:
296:
301:
646:
610:
461:
165:
62:
316:
306:
72:
368:
801:
compute diluted EPS, both the denominator (outstanding shares) and the numerator (earnings) may need to be adjusted.
496:
373:
321:
264:
1435:
405:
1526:
358:
1608:
783:
reports diluted EPS "Earnings/Share $ ", which is net income minus preferred stock dividends divided by the
1157:
884:
909:
1603:
1428:
1613:
1198:
642:
for a company. It is a key measure of corporate profitability and is commonly used to price stocks.
1128:
603:
410:
46:
1490:
244:
120:
876:
764:
536:
471:
195:
1475:
1163:
521:
259:
125:
67:
1465:
1250:
1018:
989:
571:
110:
20:
8:
1567:
1531:
1480:
1065:"Relieving the burden of EPS reporting: some practical suggestions. (earnings per share)"
596:
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200:
105:
30:
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190:
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985:
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914:
780:
635:
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155:
130:
1125:"Summaries of International Financial Reporting Standards: IAS33 Earnings per share"
1516:
1043:
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650:
363:
249:
1064:
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1218:
868:
665:
451:
415:
205:
185:
170:
115:
100:
57:
1500:
924:
759:(diluted EPS) is a company's earnings per share calculated using fully diluted
456:
424:
135:
1039:
1597:
1521:
566:
429:
348:
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180:
1124:
1577:
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653:: continuing operations, discontinued operations, extraordinary items, and
639:
501:
240:
387:
1582:
1451:
1203:
654:
491:
175:
38:
919:
649:(FASB) requires EPS information for the four major categories of the
16:
Value of earnings per outstanding share of common stock for a company
631:
1552:
1325:
1320:
1315:
1310:
670:
274:
254:
160:
1391:
1386:
1381:
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95:
845:
1420:
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225:
90:
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230:
736:
income from continuing operations − preferred dividends
982:"Earnings/Share $ - Morningstar.com Glossary E-F"
1108:"IMPACT OF EPS ON MARKET PRICES AND MARKET RATIO"
1595:
1436:
1240:International Accounting Standards Committee
1184:
1160:- figures from official financial statements
751:
604:
1011:"Diluted EPS - Morningstar.com Glossary D-D"
858:. Dilutive potential common stock includes:
1200:International Financial Reporting Standards
852:International Financial Reporting Standards
846:International financial reporting standards
312:International Financial Reporting Standards
1443:
1429:
1191:
1177:
1119:
1117:
958:"Diluted Earnings Per Share (Diluted EPS)"
892:contingent issuance contracts or agreement
611:
597:
1224:International Accounting Standards Board
1062:
1114:
673:are not relevant when calculating EPS.
1596:
1152:European banks’ earnings announcements
1424:
1172:
889:contractual rights to purchase shares
302:Generally-accepted auditing standards
1105:
647:Financial Accounting Standards Board
317:International Standards on Auditing
13:
796:Calculations of diluted EPS under
779:Calculations of diluted EPS vary.
14:
1625:
1164:Price-To-Earning Ratio calculator
1145:
374:Notes to the financial statements
824:Share-based payment arrangements
711:net income − preferred dividends
322:Management Accounting Principles
45:
774:
1527:Statement of changes in equity
1450:
1099:
1075:
1056:
1032:
1003:
974:
950:
936:
763:(i.e. including the impact of
742:weighted average common shares
692:weighted average common shares
660:
1:
930:
885:Employee stock purchase plans
727:Continuing operations formula
297:Generally-accepted principles
830:Contingently issuable shares
791:
686:profit − preferred dividends
7:
1158:Earnings Per Share Screener
910:Accretion/dilution analysis
903:
818:Convertible preferred stock
630:) is the monetary value of
10:
1630:
1040:"Earnings Per Share (EPS)"
757:Diluted earnings per share
752:Diluted earnings per share
645:In the United States, the
18:
1540:
1509:
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1334:
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166:Constant purchasing power
63:Constant purchasing power
1129:Deloitte Touche Tohmatsu
497:Accounting organizations
485:People and organizations
1491:Governmental accounting
1083:"FAS Statement No. 128"
669:declared. Dividends in
245:Amortization (business)
1476:Management accounting
1063:R. David Jr., Mautz.
730:Earnings per share =
717:average common shares
705:Earnings per share =
680:Earnings per share =
369:Management discussion
1609:Fundamental analysis
1466:Financial accounting
944:"Earnings per share"
336:Financial statements
289:Accounting standards
19:For other uses, see
1568:Capital expenditure
1532:Cash flow statement
1481:Forensic accounting
827:Written put options
562:Earnings management
532:Positive accounting
406:Double-entry system
396:Bank reconciliation
201:Revenue recognition
1558:Cost of goods sold
1548:Debits and credits
1106:Nalurita, Febria.
761:shares outstanding
702:Net income formula
624:Earnings per share
537:Sarbanes–Oxley Act
472:Sarbanes–Oxley Act
401:Debits and credits
236:Cost of goods sold
191:Matching principle
1604:Corporate finance
1591:
1590:
1563:Operating expense
1496:Social accounting
1418:
1417:
1405:List of standards
1400:
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915:Dilutive security
821:Convertible bonds
769:convertible bonds
636:outstanding share
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582:Two sets of books
577:Off-balance-sheet
219:Selected accounts
156:Accounting period
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1614:Financial ratios
1517:Income statement
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1044:Investopedia ULC
1036:
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1017:. Archived from
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988:. Archived from
978:
972:
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962:Investopedia ULC
954:
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863:convertible debt
805:Diluted shares:
785:weighted average
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651:income statement
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26:
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1486:Fund accounting
1471:Cost accounting
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1219:IFRS Foundation
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666:Preferred stock
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206:Unit of account
186:Historical cost
171:Economic entity
150:
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85:
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58:Historical cost
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12:
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1501:Tax accounting
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1146:External links
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925:Whisper number
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873:share warrants
871:
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425:General ledger
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34:
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2:
1626:
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1522:Balance sheet
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1508:
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1212:Organizations
1210:
1206:Organizations
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1201:
1194:
1189:
1187:
1182:
1180:
1175:
1174:
1171:
1165:
1162:
1159:
1156:
1153:
1150:
1149:
1130:
1126:
1120:
1118:
1109:
1102:
1088:
1084:
1078:
1070:
1066:
1059:
1045:
1041:
1035:
1021:on 2008-02-18
1020:
1016:
1012:
1006:
992:on 2008-03-17
991:
987:
983:
977:
963:
959:
953:
945:
939:
935:
926:
923:
921:
918:
916:
913:
911:
908:
907:
901:
897:
891:
888:
886:
883:
880:
878:
877:share options
875:
872:
870:
866:
864:
861:
860:
859:
857:
853:
843:
839:
836:
829:
826:
823:
820:
817:
814:
812:Stock options
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809:
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802:
799:
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786:
782:
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729:
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704:
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679:
677:Basic formula
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652:
648:
643:
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633:
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567:Error account
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449:
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431:
430:Trial balance
428:
426:
422:
419:
417:
414:
412:
411:FIFO and LIFO
409:
407:
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399:
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394:
393:
389:
384:
383:
375:
372:
370:
367:
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350:
349:Balance sheet
347:
345:
344:Annual report
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181:Going concern
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52:
48:
44:
43:
40:
37:
36:
32:
28:
27:
22:
1578:Gross income
1573:Depreciation
1410:requirements
1233:Predecessors
1202:and Related
1133:. Retrieved
1101:
1090:. Retrieved
1077:
1068:
1058:
1047:. Retrieved
1034:
1023:. Retrieved
1019:the original
1005:
994:. Retrieved
990:the original
976:
965:. Retrieved
952:
938:
898:
895:
881:share rights
867:convertible
856:common stock
849:
840:
834:
833:
804:
803:
795:
778:
775:Calculations
765:stock option
756:
755:
664:
644:
640:common stock
627:
623:
622:
502:Luca Pacioli
423: /
243: /
241:Depreciation
149:Key concepts
121:Governmental
1015:Morningstar
986:Morningstar
781:Morningstar
767:grants and
661:Calculation
515:Development
492:Accountants
388:Bookkeeping
307:Convergence
265:Liabilities
196:Materiality
84:Major types
1598:Categories
1583:Net income
1510:Statements
1452:Accounting
1204:Accounting
1135:2008-03-02
1092:2013-02-18
1049:2008-03-02
1025:2008-03-02
996:2008-03-02
967:2008-03-02
931:References
835:Earnings:
655:net income
550:Misconduct
176:Fair value
126:Management
68:Management
39:Accounting
1251:standards
1249:Selected
920:P/E ratio
798:U.S. GAAP
792:U.S. GAAP
572:Hollywood
452:Financial
354:Cash-flow
111:Financial
904:See also
815:Warrants
632:earnings
557:Creative
527:Research
457:Internal
444:Auditing
260:Goodwill
255:Expenses
106:Forensic
31:a series
29:Part of
1553:Revenue
1154:, video
745:
733:
720:
708:
695:
683:
671:arrears
522:History
416:Journal
275:Revenue
161:Accrual
1131:. 2008
850:Under
467:Report
421:Ledger
364:Income
359:Equity
270:Profit
250:Equity
226:Assets
131:Social
96:Budget
1541:Terms
462:Firms
91:Audit
1459:Type
1259:IFRS
1087:FASB
634:per
231:Cash
116:Fund
101:Cost
1335:IAS
638:of
628:EPS
136:Tax
73:Tax
21:EPS
1600::
1392:39
1387:37
1382:23
1377:19
1372:17
1367:16
1362:10
1326:17
1321:16
1316:15
1311:13
1306:12
1301:11
1296:10
1127:.
1116:^
1085:.
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1013:.
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960:.
657:.
33:on
1444:e
1437:t
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1357:8
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1347:2
1342:1
1291:9
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1281:5
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626:(
612:e
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23:.
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