16 EPS example

16 EPS example - Nobis Company Earnings per share...

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Nobis Company Earnings per share calculation for 2006 Basic Computation of weighted average shares outstanding: Dates Changes Shares O/S Restate* Fraction Weighted 1/1/2006 Beginning balance 2,000,000 1.25 1/12 208,333 2/1/2006 Repurchased 100,000 1,900,000 1.25 4/12 791,667 6/1/2006 25% Stock dividend 2,375,000 N/A 2/12 395,833 8/1/2006 Repurchase 90,000 shares 2,285,000 N/A 2/12 380,833 10/1/2006 Issued 400,000 shares 2,685,000 N/A 3/12 671,250 12/31/2006 Ending balance per B/S 2,685,000 Weighted average outstanding for the year 2,447,917 * Equals to 1.0 plus the % amount of the dividend (1.0 + 0.25 = 1.25). Numerator (net income - preferred dividends): Net income 3,750,000 (given) C/Y preferred dividend: (100,000*$10*7%) (70,000) Dividends in arrears N/A (see text) 3,680,000 Basic EPS: $1.50 (3680000 / 2447917)
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Nobis Company Earnings per share calculation for 2006 Diluted Evaluate each potentially dilutive security: Convertible preferred stock (1 share of preferred convertible into 2 shares of common) Numerator effect, if converted 70,000 (annual dividend) Denominator effect, if converted 200,000 (100,000 * 2 shares of common) Per share effect $0.350 Dilutive (less than $1.50)
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