ch 18 EPS final version

ch 18 EPS final version - Ch 18 Earnings Per Share Learning...

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1 Ch 18 Earnings Per Share Learning Objectives 1. Know the difference between a simple and a complex capital structure, and understand how dilutive securities affect earnings per share computations. 2. Compute basic earnings per share, taking into account the sale and repurchase of stock during the period as well as the effects of stock splits and stock dividends. 3. Use the treasury stock method to compute diluted earnings per share when a firm has outstanding stock options, warrants, and rights. 4. Use the if-converted method to compute diluted earnings per share when a company has convertible preferred stock or convertible bonds outstanding.
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2 Know the difference between a simple and a complex capital structure, and understand how dilutive securities affect earnings per share computations. OBJECTIVE 1 A simple capital structure is one where a corporation has no convertible securities, stock options, warrants, or other rights outstanding. A complex capital structure is one where a corporation has one or more instruments outstanding that could result in issuance of additional common shares, thus causing a dilution of earnings per share.
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3 Earnings Per Share EPS indicates the income earned by each share of common stock. Reported only for common stock . Dilution of EPS means reduction in EPS. Reduction in EPS results from potential conversion of dilutive securities into common stock.
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This note was uploaded on 12/07/2009 for the course ACCT ACCT 203 taught by Professor Kim during the Fall '09 term at HKUST.

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ch 18 EPS final version - Ch 18 Earnings Per Share Learning...

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