BVPS and EPS

Question 1

What is the assumption in BVPS?

Answer 1

• company is to be liquidated
• Assets will be realized by BV

Question 2

Formula of BVPS

Answer 2

Total SHE
———————————–
No. of Outstanding Shares

Question 3

How to allocate Total SHE?

What is the Treatment of Subscription Receivable?

Answer 3

Solve first → Preference Share
Residual → Ordinary Share

Subscription Receivable → not deducted

Question 4

How to solve for preference share?

What are the inclusions?

Answer 4

1. Liquidation Value = Par Value + Liquidation Premium
2. Preferred Dividends (that are unpaid)
   - Cumulative → all dividends in arrears
   - Non Cumulative → current year only

Dividend in Arrears = already includes current year

Question 5

Participating vs Nonparticipating

Answer 5

Participating → additional dividends (share with OS)

Question 6

Earnings per Share applies to what type of share only?

Answer 6

ordinary shares outstanding

Question 7

Earnings per Share is required for what type of company only?

Answer 7

public entities

non public → only encouraged

Question 8

Formula - BEPS

Answer 8

NI - Preference Dividends +/- Gain or Loss from Redemption
———————————–
WAOSO

NOTE : Preferred Dividends = 1 year only

Question 9

How to say it is a Gain from Redemption of Preference Share?

Answer 9

CA of Preference > Redemption Price

Question 10

Consideration for Preference Dividends

Do we need to consider dividend in arrears?

Answer 10

Cumulative → deduct whether declared or not
Non Cumulative → deduct only if declared

NOTE : Dividends in arrears = ignored

Question 11

In case of share split and share dividend…

Answer 11

retrospective application

Question 12

In case of stock rights (right issue), there is a need to multiple an “adjustment factor” to the WAOSO.

What is the formula for adjustment factor?

Answer 12

FV of shares right-on
—————
FV of shares ex-right

FV of shares ex-right = FV of shares right-on less Theoretical Value of Rights

Question 13

Formula for Theoretical Value of Rights

Answer 13

of Right needed for 1 share + 1

FV of shares right-on less Exercise Price
—————
no. of right for 1 share + 1

Question 14

Formula - DEPS (Convertible Bonds Payable)

Answer 14

NI - Preference Dividends + After Tax Interest Expense
———————————–
WAOSO + Additional Shares

Question 15

Formula - DEPS (Convertible Preference Shares)

Answer 15

NI - Preference Dividends + Preference Dividends
———————————–
WAOSO + Additional Shares

Question 16

Formula - DEPS (Options and Warrants)

Answer 16

NI - Preference Dividends
———————————–
WAOSO + Additional Shares

Question 17

Options and Warrants will be considered dilutive only if it is “in the money”. What is “in the money”?

Formula for Treasury Method

Answer 17

Market Price > Exercise Price

MP less OP
—————————- x # of Shares
MP

Question 18

What to do if there are multiple potential ordinary shares?

Answer 18

Options and Warrants → always rank 1
Convertibles → ranked according to ascending incremental EPS

NOTE : If any time DEPS > BEPS
- discontinue considering further potential OS
- lowest amount → diluted EPS

Question 19

NOTE : For dilution, since “as if”
- compute WAOSO “as if” OS already

Answer 19

Yes

Question 20

BVPS vs EPS
- what to note about preferred dividends?

Answer 20

BVPS
- Preferred Dividends → only those that are unpaid (since assets will be realized by BV)

EPS
- Preferred Dividends → 1 year only

Question 21

BVPS vs EPS
- what to note about dividends in arrears?

Answer 21

BVPS
- Dividends in Arrears → already includes current year

EPS
- Dividends in Arrears → ignored (since 1 year only nga diba)

Question 22

BVPS vs EPS
- what is the importance of cumulative or noncumulative?

Answer 22

BVPS
- to know if all dividends in arrears or current year only

EPS
- to know whether declared or not