CFA Financial Reporting and Analysis
5
www.edupristine.com © Pristine This Presentation has been prepared to provide general information about the Company to whom it is addressed. This Presentation does not purport to contain all the information. The information provided in this presentation is meant only for the recipient and is not to be shared with anyone else. FRA Topic Weight: 20%
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CFA Financial Reporting and Analysis session discuss the general principles of the financial reporting system, underscoring the critical role of the analysis of financial reports in investment decision making. For more information on this video, and to sign-up for our 10-day Free CFA Course click here - http://www.edupristine.com/10-day-cfa/cfa-financial-reporting-and-analysis/ To know more about these trainings, do contact us at -M: +91 80800 05533
Transcript of CFA Financial Reporting and Analysis
www.edupristine.com
© Pristine This Presentation has been prepared to provide general information about the Company to whom it is addressed. This Presentation does not purport to contain all the information. The information provided in this presentation is meant only for the recipient and is not to be shared with anyone else.
FRA Topic Weight: 20%
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Earning Per Share
Earning
Per Share
(EPS)
Basic
EPS
Diluted
EPS
It measures the quality of a
company’s earning per share
(EPS) if all dilutive convertible
securities were exercised.
gOutstandin Shares ofNumber Average Weighted
Dividends Preferred - IncomeNet EPS Basic
optionsstock
from issuable
shares
debt conv.
of conversion
from shares
shares pfd. conv.
of conversion
from shares
shares
average
weighted
tax1
interest
debt
econvertibl
dividends
preferred
econvertibl
dividends
preferred-incomenet
EPS Diluted
It is the most commonly used
corporate profitability
performance measures for
publicly-traded firms.
Calculated through
Treasury Stock Method
(TSM)
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TSM Operation
Option
Exercised
Fund
Received
Purchase Co’s
share @ Avg.
Market Price
Shares
Created
Net Issuance= Shares Created - Share purchased
Used to
Net In
cre
ase in
Outs
tandin
g
share
s
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Concept Checker
Suppose R&M has 100,000 stock options outstanding at the end of the year, convertible
into 100 normal equity shares per option at the strike price of $ 25. If average market
price of the stock for the entire year 2009 was $ 50, the basic & diluted EPS for 2009 is
4
2009
Net Income $120.5mn
Weighted no. of common
shares outstanding (entire
year)
85mn
No. of Preference share
outstanding
10,000
Face value @ preferred
shares
$1000
Dividend @ preferred shares 8%
A. $1.41 & $1.33
B. $1.35 & $1.44
C. $1.41 & $1.30
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Answer
Preferred Dividend = 10,000 * 1000 * 8% = $0.8mn
Basic EPS = (120.5 – 0.8)mn/85mn = $1.41
5
Diluted EPS
New equity shares
created
100000*100 10mn
Fund Received 10mn * $25 $250mn
Repurchase of
shares
$250mn/$50mn 5mn
shares
Net shares Issued 10mn – 5mn 5mn
Total Outstanding
shares after
dilution
85mn+5mn 90mn
Diluted EPS ($120.5 –$
0.8)mn/90mn
$1.33
