Earnings Per Share Overview

These flashcards cover the key concepts and terms related to Earnings Per Share (EPS) from the lecture notes, assisting in exam preparation.

Earnings Per Share (EPS)

A financial metric that summarizes the performance of a business in a single number.

Weighted-average number of common shares

The average number of shares outstanding during a reporting period, adjusted for stock splits and dividends.

Basic Earnings Per Share

EPS calculation that ignores the dilutive effects of convertible securities, options, and warrants.

Diluted Earnings Per Share

EPS calculation that includes the dilutive effect of potential common shares, reflecting how they affect earnings.

Stock Dividend

An increase in the number of shares paid to shareholders, which does not impact total earnings.

Stock Split

A corporate action that increases the number of shares outstanding while lowering the share price proportionally.

Reacquired Shares

Shares that are bought back by the company, reducing the total number of outstanding shares.

Preferred Dividends

Dividends that must be paid to preferred shareholders before any earnings are available to common shareholders.

Convertible Securities

Financial instruments that can be converted into a company's stock at the holder’s discretion.

Antidilutive Securities

Securities whose conversion would increase earnings per share and are ignored in EPS calculations.

Contingently Issuable Shares

Shares that will be issued if certain conditions are met, affecting the calculation of diluted EPS.

Stock Options

Contracts granting the holder the right to purchase shares at a specified price, influencing diluted EPS.

Complex Capital Structure

A scenario where a company has multiple types of securities that can dilute earnings per share.

Net Income

Total earnings of a company after all expenses, taxes, and costs have been subtracted.

Average Market Price

The average price of a company's shares over a specific period, used in various EPS calculations.