Earnings per Share

Question 1

how are stock dividends treated

Answer 1

Common stock issued during the year is considered outstanding beginning on the date of issue. Common stock dividends are treated as outstanding for the entire year regardless of when it was issued.1

Question 2

basic EPS

Answer 2

= net income - preferred div

/ wtd avg # shares o/s

Question 3

preferred stock is not convertible to common stock

Answer 3

Since the preferred stock is not convertible to common stock, it is not potentially dilutive. Neither security is dilutive.

Question 4

diluted EPS

Answer 4

1. net income
2. +pref div
3. • int exp saved from convertible bond
4. treasury stock
   _______________________________
5. wtd avg # shares o/s
6. • # shares if converted from preferred stock and convertible bond
7. # common stock o/s from treasury stock @ avg market price