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About this document
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- 4 pages
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- $4 one-time, yours to keep
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- Format
- Subject
- Accounting, Finance
- Module
- 16-7
This document shows how to calculate basic and diluted earnings per share (EPS) for Thompson Corporation. It includes the number of shares used to compute basic and diluted EPS for the year ended December 31, 2013, and the adjusted net income for the basic EPS calculation.
What's inside
- Company shares information
- Basic EPS calculation
- Diluted EPS calculation
- Adjusted net income for basic EPS
- Convertible preferred stock details
Who it is for: Students taking ACC 423, or studying earnings per share. (Undergraduate)
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Summary
Earnings per share (EPS) is a key measure in accounting and finance. Students learn how to calculate basic and diluted EPS for a corporation.
Basic Earnings Per Share
Basic EPS is calculated using the weighted average number of shares outstanding during the year. Students work out the number of shares for each part of the year.
Diluted Earnings Per Share
Diluted EPS takes into account all potential shares that could be converted into common stock. Students find the number of shares from convertible preferred stock.
Adjusted Net Income
Adjusted net income is the amount used in the EPS calculation. Students adjust the net income by subtracting the preferred dividends.
EPS Calculation
Students calculate the basic and diluted EPS using the adjusted net income and the number of shares. They use the formula for EPS.
Key terms
- Basic earnings per share
- A company's profit divided by the weighted average number of common shares outstanding.
- Diluted earnings per share
- A company's profit divided by the total number of shares outstanding including potential shares.
- Weighted average number of shares
- The number of shares calculated by taking into account the time period each share was outstanding.
- Adjusted net income
- Net income after subtracting preferred dividends, used in the EPS calculation.
- Convertible preferred stock
- A type of preferred stock that can be converted into a fixed number of common shares.
- Stock dividend
- A dividend paid in the form of additional shares rather than cash.
Questions this document helps with
- How do you find the weighted average number of shares?
- What is the formula for basic earnings per share?
- How do you adjust net income for EPS calculation?
Summary written with AI from the document's text.
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