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ael719
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Posted: 07 Mar 2010 at 22:53 \| IP Logged

Another important tip: Always calculate Basic Earnings Per Share (BEPS) first. Then apply the various DEPS methods/calculations to your original BEPS calculation.

DEPS is hypothetical. The 4,900 / 2,000 is added into BEPS to find the highest amount of possibly diluted common shares outstanding for the entire year.

We want to see the effect if it occurred from 1/1 - 6/30 because it actually occurred on 7/1 and already in the BEPS calculation.

MARBNYC
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Posted: 08 Mar 2010 at 06:33 \| IP Logged

btw what does PCS mean? I read it as preferred common stock but that can't be it bc those are not elegible for the company's net earnings.

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Marlene

ael719
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Posted: 08 Mar 2010 at 08:45 \| IP Logged

PCS = Potential Common Stock

PCS = the potential impact of Convertible items included to BEPS, for the purpose of calculating DEPS

Again, it really helped me to understand how to calculate BEPS first and then apply any dilutive items to find DEPS. For example, I would always run into problems with adding or subtracting Preferred Stock Dividends for BEPS and DEPS calculations. (For BEPS, always subtract cumulative PSDivs and declared divs of Non-cumulative PSDivs; for DEPS, add back only convertible PSDivs. Depending on how you calculate it, sometimes PSDivs don't have to appear at all.)

MARBNYC
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Posted: 08 Mar 2010 at 14:00 \| IP Logged

That was emphasized a lot in the Becker review course, always do BEPS first, then compute DEPS and if BEPS > DEPS = then it is dilutive, but if BEPS < DEPS it is antidilutive and not included in the income stmt.

Can convertible preferred stock be both cummulative and non-cumulative? if so then for computing DEPS we add back any cummulative preferred stock dividends for that period and any preferred stock dividends declared, also for that same period, correct?

And how is it that sometimes preferred stock dividends do not have to appear at all? shouldn't preferred stock dividends declared for a given period be added to NI (in computing DEPS)?...could it be that the dividends declared are for preferred stock that is NONCONVERTIBLE (into common stock)? and because it is not convertible into common stock it can never dilute earnings per share...please correct me if I'm wrong

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Marlene

ael719
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Posted: 08 Mar 2010 at 16:07 \| IP Logged

MARBNYC wrote:

I think PS can only be either Cumulative or Non-Cumulative. Cumulative PS means that they are owed a dividend, whether declared or not, every year. Non-cumulative PS means that they only receive dividend's when declared and there are no dividends in arrears.

PS can only be, Cumulative/Non-cumulative or Convertible/Non-convertible

By not including PS Div in DEPS, I meant it can be negated in that it is subtracted for BEPS and added back for DEPS. Also, PS Div on Non-convertible PS cannot be converted to CS for DEPS calculations and the Dividend stays.

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