MGT 2010 - Chapter 20.1: Earnings Per Share

Diluted EPS is meant to be a worst-case scenario.

Convertible securities and options are always included in the calculation of diluted EPS.

Earnings per share refer to the amount of earnings attributable to each share of common and preferred stock.

Reporting earnings per share for public companies is optional; however, its presentation is strongly recommended.

The treasury stock method is only used for options, and only the denominator is affected.

Only firms with a complex capital structure must compute diluted EPS.

An anti-dilutive effect means that EPS is decreased as a result.

Anti-dilution must be considered only with complex capital structures.

The diluted EPS does not have to be disclosed in the financial statements.

Basic EPS & fully diluted EPS are both historical amounts.

Stock dividend and stock splits are treated as though they had been in effect for the entire period.

Corporations with simple capital structures are required to present two sets of EPS data.

In some cases, diluted earnings per share amounts may be the same as the basic earnings per share amounts.

EPS figures must be disclosed under both ASPE and IFRS.

A reverse split may be used to increase the value per share of a company.