CH 16 Class Notes - Part 2 - CHAPTER 16 EARNINGS PER SHARE...

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CHAPTER 16 – EARNINGS PER SHARE II. Basic Earnings per Share (EPS) A. Simple Capital Structure: A single presentation of “Basic EPS” is sufficient B. When the number of common shares changes, EPS calculations are based on the weighted average number of shares outstanding (denominator). Issuance of New Shares: Stock Dividends and Stock Splits: Reacquired Shares : C. Earnings Available to Common Shareholders (numerator) : This adjustment is made for cumulative preferred stock whether or not dividends were declared that period. 1
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EARNINGS PER SHARE Sovran Metals Corporation reported net income of $154 million in 2008. (tax rate 40%). Its capital structure included: Common Stock January 1 60 million shares outstanding (in millions, except per share amount) Basic EPS: Net income $154 = $2.57 60 Shares outstanding 2
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ISSUANCE OF NEW SHARES Sovran Financial Corporation reported net income of $154 million for 2008 (tax rate 40%). Its capital structure included: Common stock January 1 60 million common shares outstanding March 1 12 million new shares were sold Basic EPS: (amounts in millions, except per share amount) Net income $154 $154 = = $2.20 60 + 12 ( 10 / 12 ) 70 Shares New at Jan. 1 shares 10 3
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STOCK DIVIDENDS AND STOCK SPLITS Sovran Financial Corporation reported net income of $154 million in 2008 (tax rate 40%). Its capital structure included: Common stock January 1 60 million common shares outstanding March 1 12 million new shares were sold June 17 A 10% stock dividend was distributed Basic EPS: (amounts in millions, except per share amount) Net income $154 $154 = = $2.00 60 (1.10) + 12 ( 10 / 12 ) (1.10) 77 Shares New at Jan. 1 shares A___ Stock Dividend ___A Adjustment 77 4
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REACQUIRED SHARES Sovran Financial Corporation reported net income of $154 million in 2008 (tax rate 40%). Its capital structure included: Common stock January 1 60 million common shares outstanding March 1 12 million new shares were sold June 17 A 10% stock dividend was distributed October 1 8 million shares were reacquired as treasury stock Basic EPS: (amounts in millions, except per share amount)
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This note was uploaded on 07/26/2009 for the course ACCT AIM 4332 taught by Professor Tiffanybortz during the Summer '09 term at University of Texas at Dallas, Richardson.

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CH 16 Class Notes - Part 2 - CHAPTER 16 EARNINGS PER SHARE...

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