Earnings per Share

Question 1

BEPS Equation

Answer 1

Income available to common shareholders/
weighted-average number of CS outstanding

Question 2

BEPS Numerator (income available to common shareholders) calculation

Answer 2

Income statement amount
-Dividends on PS for current period (cumulative or declared noncumulative)

Question 3

DEPS

Answer 3

Must be reported by entities that do not have simple capital structures.

Question 4

Dilutive potential common shares (PCS)

Answer 4

securities or other contracts that may entitle the holder to obtain CS
included in DEPS calculation only if they are dilutive

Question 5

Dilution is a reduction of BEPS from

Answer 5

convertible securities (PS or debt) were converted
Stock options exercised

Question 6

DEPS Numerator

Answer 6

BEPS numerator
+ effect of dilutive PCS
(dividends on convertible PS and after-tax interest expense related to convertible debt)

Question 7

DEPS Denominator

Answer 7

BEPS denominator
+ effect of dilutive PCS
(weighted-average number of additional sales of CS that would have been outstanding in dilutive PCS had been issued)

Question 8

DEPS (PS Numerator/Denominator)

Answer 8

BEPS Num+(PSpar%)/
BEPS Dem+(PS*conversion ratio)

Question 9

DEPS (Bond Numerator/Denominator)

Answer 9

BEPS Num+(face amount%(1-t))/
BEPS Dem+((face amount/par))*conversion ratio

Question 10

DEPS (Treasury Stock Method)

Answer 10

Excise price must be less than market average.
# of options*excise price
proceeds from options/market average
incremental shares=CS assumed issued-CS assumed purchased
DEPS=NI/(BEPS dem+incremental shares)