Their presence affects the reporting of a firms

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Unformatted text preview: presence affects the reporting of a firm’s earnings per share (EPS). basic EPS Earnings per share (EPS) calculated without regard to any contingent securities. diluted EPS Earnings per share (EPS) calculated under the assumption that all contingent securities that would have dilutive effects are converted and exercised and are therefore common stock. The presence of contingent securities, which include convertibles as well as warrants (described later in this chapter) and stock options (described in Chapter 1 and later in this chapter), affects the reporting of the firm’s earnings per share (EPS). Firms with contingent securities that if converted or exercised would dilute (that is, lower) earnings per share are required to report earnings in two ways— basic EPS and diluted EPS. Basic EPS are calculated without regard to any contingent securities. They are found by dividing earnings available for common stockholders by the number of shares of common stock outstanding. This is the standard method of calculating EPS that has been used throughout this textbook....
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This document was uploaded on 01/19/2014.

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