Continuing from 16.01 - Earnings Per Share: Basic - Lesson 2, Roger Philipp, CPA, covers an in-depth example of a basic Earnings Per Share (EPS) calculation. He shows how tricky items such as a stock dividend, a stock split and a treasury stock repurchase are included in the weighted average common shares outstanding in the denominator.
He then goes over net income minus preferred dividends in the numerator. Remember that weighted average common shares outstanding will generally not equal common shares outstanding at the end of the year and also that any retrospectively applied shares will apply to previous years shown in comparative financial statements.
At the end of the lesson, Roger provides a helpful summary of basic EPS and also looks ahead to the next lecture on diluted EPS.
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Video Transcript Sneak Peek:
So, when we talk about the weighted average number of shares outstanding, we're gonna trade stock dividends, stock splits, stock subscriptions, delayed issuance of stocks, all of those are gonna be traded as if they had been outstanding for the whole year. So, we'll kinda talk that, you know, in a sense, retroactively or retrospectively, as of the beginning of the year.
So, this is the thing called weighted average number of shares outstanding. So, what I wanna do is talk about what does weighted average number of shares outstanding mean? Let's look at that, so to do that, you'll see that there is an example in your notes for weighted average number of shares outstanding. So, I'm gonna put here a one. Weighted average number of common stock outstanding, that's where we're gonna do this formula. So, on average, how many shares are outstanding?
