Steps_for_Calculating_EPS

Steps_for_Calculating_EPS - Add this EEs NE and DE to the...

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Steps for Calculating EPS 1. Identify the type of Capital Structure 2. If Simple structure, calculate Basic EPS only. 3. If Complex structure, calculate both Basic and Diluted EPS. 4. For Diluted EPS: a. Calculate the Earnings Effect (EE) of each potentially dilutive security, i.e. EE = Numerator Effect (NE) / Denominator Effect (DE). b. Rank order the EE’s from smallest to the largest. c. If the smallest EE is greater than or equal to BEPS, stop; there is no dilution and report BEPS only. If the smallest EE is less than BEPS, then it is dilutive.
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Unformatted text preview: Add this EEs NE and DE to the BEPS formula and calculate the first DEPS, label it DEPS (1). d. If the second smallest EE is greater than or equal to DEPS (1), stop. Report BEPS and DEPS (1). The second and all remaining securities are anti- dilutive. If the second smallest EE is less than DEPS (1), then add the second smallest EEs NE and DE to the DEPS (1) formula and recalculate. Follow this procedure for all remaining securities keeping in mind that successive DEPSs should get smaller not larger. <...
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This note was uploaded on 11/07/2011 for the course ACCT 302 taught by Professor Staff during the Fall '11 term at S.F. State.

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