[Anonymous]

Hello everyone,

I know the formula to calculate Basic EPS = Net Income – Preferred Dividends / WACSO

If I understand correctly:

if there are CUMULATIVE preferred stocks we subtract the ACCUMULATED preferred dividends

if there are NON CUMULATIVE preferred stocks we subtract the dividends DECLARED

what I’m uncertain about is the following:

if there are NON CONVERTIBLE preferred stock we subtract the dividends DECLARED

if there are CONVERTIBLE preferred stock we subtract the ACCUMULATED preferred dividends

Am I correct to assume that the aforementioned statements are correct?

thanks in advance for your assistance.

[KJ]

f the company has convertible bonds, use the if-converted method:

1.Treat conversion as occurring at the beginning of the year or at issuance date, if it occurred during the year (additive to denominator).
2.Eliminate related interest expense, net of tax (additive to numerator).

If the company has convertible preferred stock, use the if-converted method:

1. Eliminate preferred dividend from numerator (decrease numerator).
2. Treat conversion as occurring at the beginning of the year or at issuance date, if it occurred during the year (additive to denominator).

FAR - August 2016
AUD - September 2016
REG - October 2016
BEC - November 2016

Remember: "Everything should be made as simple as possible, but not simpler." - Albert Einstein

[ABTX411]

In the basic EPS calc, we only subtract the current year preferred dividends – not the accumulated amount.

For cumulative preferred, you subtract the current year dividend regardless of whether or not it has been declared.

For non-cum, you only subtract the dividend if it has been declared.

The statements above are true regardless of whether the preferred stock is convertible or not. You never care if the stock has a convertible feature when calculating basic EPS.

For diluted EPS, the dividends for CONVERTIBLE will be excluded from the numerator.

If you have a sample practice problem, I can help you work through it.

BEC - 90 - 2/04/2016
AUD - 97 - 2/29/2016
FAR - 92 - 4/19/2016
REG - 88 - 5/19/2016

[Anonymous]

Thanks guys really appreciate the answers

[Anonymous]

Thanks guys really appreciate the answers

[Author]

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