Acc 440 – Corporate Reporting
EPS
Earnings per Share * The number that is reported most frequently in the media and receives by far the most attention by investors and creditors is earnings per share. * Regulators impose standards to ensure the comparability of EPS across companies. * This seems simple, Earnings / Number of shares outstanding …but it’s not. Basic EPS * Earnings available to common shareholders for each share of stock outstanding. * Ignores any potential common shares which might arise from convertible securities. * Calculation:
Net income (after tax) – Preferred dividends
Weighted average outstanding common stock Numerator: Basic EPS Net income Less: Current period’s cumulative preferred stock dividends (always) Less: Noncumulative preferred stock dividends (only if declared) = Net income available to common shareholders Denominator: Basic EPS Weighted-average outstanding common shares

Stock Dividends and Stock Splits * Common shares issued as part of stock dividends or stock splits are treated retroactively. * All shares outstanding prior to the stock dividend or stock split date are adjusted. Weighted-average outstanding common shares

Reacquired Shares * The weighted-average number of shares is reduced by the number of reacquired shares, weighted by the number of months the shares were NOT outstanding. * Applies to both shares which are retired and those held in treasury. Weighted-average outstanding common shares