Principles of Financial Accounting · free preview
Earnings per Share as a Performance Measure
Earnings per share divides net income available to common shareholders by weighted average common shares outstanding, and the result compresses an entire income statement into the single per-share number markets quote.
1. The formula and its inputs
The formula and its inputs
2. A worked calculation
A worked calculation
3. Why EPS dominates
Why EPS dominates
4. Reading EPS responsibly
Reading EPS responsibly
5. Numerator definition
What belongs in the numerator of basic EPS?
6. Weighting logic
Why is the EPS denominator weighted by time?
7. Basic EPS computation
Net income is 500,000 dollars, preferred dividends are 30,000 dollars, and weighted average shares are 220,000. Compute basic EPS rounded to two decimals.
8. Dilution purpose
What does diluted EPS add to the picture?
9. EPS available earnings
Net income is 500,000 dollars and preferred dividends are 30,000 dollars. Compute earnings available to common shareholders in dollars, number only.
10. Year-end share weighting
A firm has 200,000 shares for the first six months and 240,000 for the second six months. Compute weighted average shares. Number only.
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