“WEEK 9”

PART A

Calculation of Earnings per Share for the Year 2019:

EPS (2019) = Net income available for the shareholders / Weighted Avg. Number of Stock

So,

Basic EPS for 2019 = $1,460,000 / 1275000

Basic EPS for 2019 = $1.15

Calculation of Adjusted Comparative Earnings per share for the Year 2018:

In the previous year (2018):

Total Earnings = 1.5 dollars x 9 lacs

Total Earnings = 1,350,000 dollars

So,

Restated shares of the equity (weighted) = add (9 lacs x 1/6) into 9 lacs

= 9 lacs + 1.5 lacs

Restated shares of the equity (weighted) = 1,050,000

Calculation of BEPS (Adjusted)

BEPS = Net profit / Equity Shares

= 1,350,000 / 1,050,000

BEPS = 1.28 dollars or 1.3 dollars

PART B

Diluted (EPS)

Diluted Earnings per share is defined as the earnings that are made on each stock of a

company that is considered public and calculated on the assumption that all changeable securities

were appropriately exercised. Not only the common shares but also convertible Pref. stock,

warrants, convertible bonds, and stock options are taken into consideration by the DEPS, which

assumes that all these securities are altered truly. Such EPS is seeing essential for the companies’

shareholders as the earnings that are earned by a stockholder in the worst situations are laid down

by DEPS. It is necessary for the calculation of diluted earnings per share to add the effect of all

the common stocks that are considered dilutive. It is important to know that the company’s basic

EPS is always greater than it’s another EPS (diluted) in the case when the profit is earned by
such an organization. The reason is that the profit that is generated is divided among a larger

number of stocks, Similarly, if the company faced a loss in any of the years, a lower amount of

loss will be shown by the diluted earnings per share as compared to basic EPS as such loss would

be spread out over a larger number of stocks.

Stock options are one of the securities that can dilute the company’s EPS (basic). Such

securities are not considered as the common shares of the corporation; however, they can be

changed into the common stock if that option is exercised by the holder. When the stock options

are converted into common stock, the no. of shares outstanding (weighted) is increased due to

such dilutive securities that bring a decline in the company’s EPS.