Earnings Per Share (EPS) Overview

Vocabulary flashcards based on key concepts from the Earnings Per Share lecture notes.

Earnings Per Share (EPS)

The most widely used financial statistic for publicly traded firms, reported quarterly as required by the SEC.

Basic EPS

Reported for companies with simple capital structures, containing only common stock and/or nonconvertible senior securities.

Diluted EPS

Reported for companies with complex capital structures, containing at least one potentially dilutive security.

Dilutive securities

Securities that can decrease EPS by increasing the number of common shares outstanding.

Exercise price

The predetermined price at which stock options and warrants allow the purchase of shares.

Antidilutive effect

When the increase in earnings figure exceeds the increase in the number of shares, causing EPS to increase.

Weighted average number of shares

The number of shares outstanding during the year weighted by the portion of the year they were outstanding.

Stock options

Give the investor the right to purchase shares of common stock at a predetermined exercise price.

Convertible bonds

Bonds that can be exchanged for common stock, thus potentially increasing the number of outstanding shares.

Stock dividends

Noncash transactions that increase shares outstanding, but do not change the owners’ proportionate claim on earnings.