Earnings Per Share: Basic - Lesson 1

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• published: 02 Jul 2015
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In the video, 16.01 - Earnings Per Share: Basic - Lesson 1, Roger Philipp, CPA, CGMA, gives a conceptual overview of Earnings Per Share (EPS), one of the most-talked about numbers in a company’s financial statements. EPS is the amount that, theoretically, each common shareholder would receive if the company paid out all of its income in the form of a dividend. Basic and diluted EPS are required to be disclosed on the face of the income statement for both net income and income from continuing operations. EPS from discontinued operations, and formerly extraordinary items, must be shown on either the face of the income statement or in the footnote disclosures. Roger explains the difference between basic and diluted EPS. The ‘basic’ in Basic EPS refers to a simple capital structure in which there are no potentially dilutive items that could be converted into common stock. Examples of items that can potentially be converted into common stock are: convertible bonds, stock options, stock rights and stock warrants. The ‘diluted’ in Diluted EPS refers to a complex capital structure and is calculated upon the assumption that anything which could potentially get converted into common stock does get converted. In other words, think of diluted EPS as fully diluted EPS. Website: https://www.rogercpareview.com Blog: https://www.rogercpareview.com/blog Facebook: https://www.facebook.com/RogerCPAReview Twitter: https://twitter.com/rogercpareview LinkedIn: https://www.linkedin.com/company/roger-cpa-review Are you accounting faculty looking for FREE CPA Exam resources in the classroom? Visit our Professor Resource Center: https://www.rogercpareview.com/professor-resource-center/ Video Transcript Sneak Peek: Alright, let's move on to another fun and exciting area. Welcome, welcome, to what, Earnings per Share, EPS. Now, what is earnings per share? Earnings per share is one of the most talked about numbers in the financial statements. Creditors want to know about it. Investors want to know about it. Basically, they're saying, "Hey, I need this information." It is information that is required to be disclosed on the face of the income statement for publicly held companies, we'll expand on that in a minute.