Simple versus Complex Capital Structure
Ordinary shares are those equity shares that are subordinate to all other types of equity.
Basic EPS
Basic EPS is the amount of income available to common shareholders divided by the weighted average number of common shares outstanding voer a period.
The weighted average number of shares outstanding is a time-weighting of common shares outstanding.
Diluted EPS: The If-Converted Method
Diluted EPS is always equal to or less than basic EPS.
Diluted EPS When a Company Has Convertible Preferred Stock Outstanding
First, the convertible preferred securities would no longer be outstanding; instead, additional common stock would be outstanding. Thus, under the if-converted method, the weighted average number of shares outstanding would be higher than in the basic EPS calculation. Second, if such a conversion had taken place, the company would not have paid preferred dividends. Thus, under the if-converted method, the net income available to common shareholders would be higher than in the basic EPS calculation.
Diluted EPS When a Company has Convertible Debt Outstanding
Diluted EPS: The Treasury Stock Method
Changes in EPS
