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Flashcards in Earnings per Share Deck (3)

What EPS figures are disclosed?

basic and diluted. Basic EPS is the EPS based only on actual transactions for the year. Diluted EPS is a "worst-case" figure reflecting the potential dilution of stock options and convertible securities.


What is basic EPS?

Includes only actual common shares outstanding.

BEPS = (net income) / (weighted average common shares outstanding)

BEPS = (net income - preferred stock dividend) / (weighted average common shares outstanding)


What is diluted EPS?

Includes securities that may become common stock in the future, such as convertible stock and stock options, in addition to actual shares of common outstanding.

DEPS = (net income available to common adjusted for effects of PCS) / (weighted average common shares plus shares issuable from PCS)