‘Earnings per share’ or EPS measure is an important measure for shareholders as it allows each shareholder to know his share in the company’s earnings. ‘Earnings per share’ is required to be reported on the income statement for net income as well as income from continuing operations. EPS is calculated for common stock shares only. It is calculated differently for a company with a simple capital structure and for a company with a complex capital structure.

1. A A R W I N ' S G U I D E T O C F A
P R E S E N T S
E A R N I N G S
P E R S H A R E
( E P S )
W W W . A A R W I N S W O R L D O F F I N A N C E . C O M

2. EARNINGS
PER
SHARE
‘Earnings per share’ or EPS
measure is an important
measure for shareholders as
it allows each shareholder to
know his share in the
company’s earnings. EPS is
calculated for common stock
shares only.

3. E A R N I N G S P E R S H A R E
differently for companies with Simple
capital structure and for companies with
Complex capital structure.
are calculated

4. A company that does not
have dilutive securities is
said to have a simple capital
structure .
those that have dilutive
securities are said to have a
complex capital structure
Simple Complex

5. are securities that can be
converted into common
stock shares.
Dilutive
securities

6. TYPES OF
DILUTIVE
SECURITIES
Convertible Preferred
stock
Convertible debt
Stock options and
warrants

7. B A S I C E P S

8. Net Income – preferred dividends
__________________________________________
Weighted average number of common stock
outstanding
Basic EPS is calcualted for
companies with simple
capital structure.

9. D I L U T E D E P S

10. i.e. what would be the earnings per share
assuming all the dilutive securities were
converted to common stock.
Companies that have a
complex capital structure
are required to report a
diluted EPS

11. Net Income
_______________________________________
Weighted average common stock +
shares from conversion of conv. Pref.
stock
Diluted EPS for a company
having convertible
preferred stock

12. Net Income – preferred dividends + after
tax interest expense
______________________________________
Weighted average common stock +
shares from conversion of conv. debt
Diluted EPS for a company
having convertible debt

13. Net Income – preferred dividends
_____________________________________
Wt. avg. common stock +new shares
issued – shares repurchased
Diluted EPS for a company
having stock options and
warrants

14. T H A N K Y O U
F O R Y O U R
T I M E
R E A D T H E C O M P L E T E A R T I C L E O N
A A R W I N ' S G U I D E T O C F A