Hi guys!

I lurk mostly, but I have a question and was hoping you guys could help.

The question is regarding earnings per share.  I know that the earnings per share is calculated as: 

net income - dividends on preferred stock/WACS 

My question is, doesn't net income already take into consideration the fact that dividends on preferred stock have been subtracted out?  And if the dividends haven't been declared yet (hence a payable) wouldn't the payable still be netted to net income?  Could someone please help me, I'm so confused!

Thanks in advance!

I'm bored and have no idea why I'm reading this post, but let me try and answer your question, at least from an academic sense.

Earnings per share allocates current period net income to each share of "common" stock only.  The figure represents the hypothetical amount that each common shareholder would receive if a company were to distribute all of its current income as dividends.  Preferred shareholders lack control, but have priority as to dividends.  Therefore, if the company were to distribute all of its income, it would be required to distribute the preferred allocation first, then give the remaining amount to the common shareholders.  That's why you need to take out the preferred portion first to get the numerator in BEPS.