【正文】 ghts ? Stock options, warrants, and rights provide no cash yield to investors. ? Options, warrants, and rights are included in the putation of diluted EPS for a particular period only if they are dilutive. ? The FASB selected the treasury stock method for puting EPS when options, warrants, or rights are involved. 1836 ? Number of shares of mon stock made available to employees 5,000 ? Average market price of stock per share during the year $50 ? Exercise price per share on options $40 Number of shares sold 5,000 Proceeds from sale (5,000 $40) = $200,000 Number of shares that could be purchased with the proceeds ($200,000 247。 2020 Cengage Learning PowerPoint presented by: Douglas Cloud Professor Emeritus of Accounting, Pepperdine University Earnings Per Share 182 Dividend Payout Ratio ? Investors are interested in dividends and can use EPS data to pute a dividend payout ratio. ? Compute by dividing dividends per share by earnings per share. ? Earnings per share data receive wide recognition in the annual reports issued by panies, in the press, and in financial reporting publications. 183 Simple and Complex Capital Structures ? Dilutive securities are securities whose assumed exercise or conversion results in a reduction in earnings per share. ? Antidilutive securities are securities whose assumed conversion or exercise results in an increase in earnings per share. (continues) 184 Simple and Complex Capital Structures ? In February 1997 the FASB, working with the IASC, issued Statement No. 128, “Earnings per Share.” ? The new standard eliminated most of the arbitrary and plex EPS putations that had evolved and replaced them with a historicalbased basic EPS. (continues) 185 Considers only mon shares issued and outstanding. Basic Simple and Complex Capital Structures Reflects the maximum potential dilution from all possible stock conversions that would have decreased EPS. Diluted (continues) 186 ? has only mon stock ? has only mon and nonconvertible preferred stock outstanding ? has no convertible securities, stock options, warrants, or other rights outstanding Simple and Complex Capital Structures A simple capital structure is one where a corporation― (continues) 187 The Basic Equation for EPS: Net Ine – Preferred Dividends WeightedAverage Common Shares Outstanding Simple and Complex Capital Structures (continues) 188 Simple and Complex Capital Structures If the corporation has one or more instruments outstanding that could result in issuance of additional mon shares, thus causing a dilution of earnings per share, it has a plex capital structure. 189 Issuance or Reacquisition of Common Stock Jan. 1 to May 1 10,000 4/12 = 3,333 May 1 to Nov. 1 15,000 6/12 = 7,500 Nov. 1 to Dec. 31 13,000 2/12 = 2,167 Weightedaverage number of shares 13,000 1810 Stock Dividends and Stock Splits ? Shares issued for exercise of options on February 1 400 ? Shares issued for 10% stock dividend on May 1 300 ? Shares sold for cash on September 1 1,200 ? Shares repurchased on November 1 400 ? Shares issued for 3for1 stock split on December 1 8,200 A pany had 2,600 shares of mon stock outstanding on January 1. The following activities affecting mon stock took pla