Eps

Dhaval Master (Practicing Company Secretary) (125 Points)

16 October 2012

What is Meaning of Basic & Dilluted EPS, any difference between both...can Basic and Dilluted EPS are same on all time.?

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2 Replies

CA Manish (Job) (5264 Points)
Replied 16 October 2012

Basic earnings per share should be calculated by dividing the net

profit or loss for the period attributable to equity shareholders by the

weighted average number of equity shares outstanding during the period.

For the purpose of calculating basic earnings per share, the net

profit or loss for the period attributable to equity shareholders should be

the net profit or loss for the period after deducting preference dividends

and any attributable tax thereto for the period.

Diluted Earnings Per Share

For the purpose of calculating diluted earnings per share, the net

profit or loss for the period attributable to equity shareholders and

the weighted average number of shares outstanding during the period

should be adjusted for the effects of all dilutive potential equity

shares.

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CA Manish (Job) (5264 Points)
Replied 16 October 2012

Example:-

Example - Convertible Debentures

Net profit for the current year	Rs. 1,00,00,000
No. of equity shares outstanding	50,00,000
Basic earnings per share	Rs. 2.00

No. of 12% convertible debentures of	1,00,000
Rs. 100 each
Each debenture is convertible into
10 equity shares
Interest expense for the current year	Rs. 12,00,000
Tax relating to interest expense (30%)	Rs. 3,60,000
Adjusted net profit for the current year	Rs. (1,00,00,000 + 12,00,000 -
	3,60,000) = Rs. 1,08,40,000
No. of equity shares resulting from	10,00,000
conversion of debentures
No. of equity shares used to compute	50,00,000 + 10,00,000 =
diluted earnings per share	60,00,000
Diluted earnings per share	1,08,40,000/60,00,000 =
	Re. 1.81