Earnings Per Share: Basic - Lesson 2

In the video 16.01 - Earnings Per Share - Basic - Lesson 2, Roger Philipp, CPA, CGMA, explains the components of the basic Earnings Per Share (EPS) calculation. The numerator for Basic EPS is net income minus preferred dividends, depending on whether the preferred dividends are cumulative or non-cumulative, declared or not declared.

If preferred dividends are non-cumulative, include only those declared. If cumulative, include the accumulated dividend for the year regardless of whether it was declared. The denominator for Basic EPS is the weighted average number of common stock shares outstanding.

Stock issuance, treasury stock repurchase, stock dividends, stock subscriptions, and stock splits must be accounted for when determining the weighted average. Of these, only shares issued to the public during the year and treasury stock repurchases are prorated for the portion of the year to which they apply. All others are applied retrospectively when calculating basic EPS; they are calculated as if they occurred the first day of the year.

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Video Transcript Sneak Peek:

Now, as we go through this, what we need to do is we need to kinda set it up so that it's understandable. So, what I'm gonna do is I'm gonna set up here the two types called basic and diluted. And as you calculate it, it's what? It's something divided by something to get your earnings per share.

So as we look at this, I'm gonna start here with my basic earnings per share, which is simple. And that is your basic or your simple earnings per share. That assumes there's nothing potentially dilutive. Then, we're gonna go on to our diluted earnings per share, which is your complex system, which is anyone who could convert, does so. So, we're gonna go through this and we're gonna calculate it. We're gonna have this divided by something. So, up here we're gonna have the dollars and we're gonna divide it by a certain number of shares.

Видео Earnings Per Share: Basic - Lesson 2 канала UWorld Roger CPA Review