Earnings Per Share

[siddharth]

Hi friends,

i have a doubt in calculating EPS if there is share split and share consolidation?

In share split no. of shares increases. so i feel it should be calculated like bonus issue. is it correct?

Share consolidation leads to decrease in no. of shares then how EPS is calculated?

Thanks

[ER2008]

Hi siddharth,

I am not sure if this will help but this is what i am sure of that eps is being calculated by the formula earnings attributable to ordinary shareholders/weighted average number of share in issue.

To work out the weighted average # of shares, there is a way to do this which i think you should refer to your text, that will simplify it for you.

thank you

i hope that helps

Er2008

[Veda]

Hi Siddharth,

This might help you for part of your querry. Right now I am running out of time, but I will try to answer the other querry soon.

Share split is just the book entry as the number of shares will increase but the share capital will remain the same similar to bonus issue.

In share split the nominal value of share is divided increasing the number of shares.

Suppose Sure Co has
Issued share capital of 4m shares of $1 each.
The profit for the year is $10m
The Sure Co has decided to split its shares into half.
The number of shares will be doubled i.e. but the amount share capital will not change.
Therefore the total number of shares after share split (4m x 2) = 8m shares.
EPS = $10m/8m shares
= $1.25 per share.

Veda