Bhupendra Imrt B School Lucknow Difference Between Eps N Dps
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DIFFERENCE BETWEEN EPS &DPS
EPS • The profitability of the shareholder’s investment can be measured in many other ways. One such measure is to calculate the earning per share ( EPS) • The earning per share is calculated by dividing the profit after taxes by the total number of ordinary shares outstanding.
Formula of EPS • BASIC FORMULA Net income - Preferred Dividend Weighted Average common shares outstanding EPS= Profit after tax Number of share outstanding
ABOUT EPS • EPS is used particularly by investors and analysts to assess the performance of a company over a period of time , and to compare the performance of a company with that of other companies • It is a more reliable measure than profit alone • It is used to calculate the P/E ratio (Price/Earnings)
ABOUT EPS EPS simply shows the profitability of the firm on a per share basis ;it does not reflect how much is paid as dividend and how much is retained in the business. But as a profitability index , it is a valuable and widely used ratio •
Earnings Per Share: Complex Structures: Summary Dual EPS Presentation
Basic EPS
Net income adjusted for interest (net of tax) and preferred dividends Weighted average number of common shares assuming maximum
Diluted EPS
Dilutive Dilutive Options and Warrants Dilutive Contingent Issues
Earnings Per Share-Complex Capital Structure Diluted EPS includes the effect of all potential dilutive common shares that were outstanding during the period.
Illustration 16-17
Companies will not report diluted EPS if the securities in their capital structure are antidilutive
DPS • DPS is the earnings distributed to ordinary shareholders divided by the number of ordinary shares outstanding
FORMULA OF DPS • DPS=Earning paid to shareholders (dividends) Number of ordinary shares outstanding
• DPS,the amount of dividend that a stockholder will receive for each share of stockheld.It can be calculated by taking the total amount of dividend paid and dividing it by the total share outstanding. • If a company issue a $1 million dividend and has 10 million share, the dividend pershare
ABOUT DPS • Dividend per share does not usually need to be calculated by investors as it is usually disclosed. Careless readers may sometimes confuse the final dividend with the total paid over the year. • Dividends are paid to holders of shares on the record date which will be announced beforehand by the company. More important from an investor's point of view is the ex-dividend date on, and after, which shares bought or sold on a stock exchange under normal terms will be sold without the dividend (so that the seller will get the dividend). • Companies may pay interim dividends during the year as well as a final dividend. These should all be added together to get the total
Preferred Stock Included in Capital Structure • Basic EPS reflects only income available to common stockholders; it does not include preferred stock. • Dividends on preferred stock should be deducted from income before extraordinary or other special items from net income for EPS, if preferred stock is in the capital structure.
Stability of dividend • In India,companies announce dividend as per cent of the paidup capital per share. This can be converted into DPS. • When the company reaches new level of earning & expects to maintain them,the annual dividend per share or dividend rate may be increased.(prosperity)
Multiple Potentially Dilutive Securities
• Remember that preferred dividends were initially subtracted from income to arrive at income available to common shareholders.
• When we assume conversion of the preferred stock, those dividends must be added back.
CAUTIO
thank…..u
EPS • The profitability of the shareholder’s investment can be measured in many other ways. One such measure is to calculate the earning per share ( EPS) • The earning per share is calculated by dividing the profit after taxes by the total number of ordinary shares outstanding.
Formula of EPS • BASIC FORMULA Net income - Preferred Dividend Weighted Average common shares outstanding EPS= Profit after tax Number of share outstanding
ABOUT EPS • EPS is used particularly by investors and analysts to assess the performance of a company over a period of time , and to compare the performance of a company with that of other companies • It is a more reliable measure than profit alone • It is used to calculate the P/E ratio (Price/Earnings)
ABOUT EPS EPS simply shows the profitability of the firm on a per share basis ;it does not reflect how much is paid as dividend and how much is retained in the business. But as a profitability index , it is a valuable and widely used ratio •
Earnings Per Share: Complex Structures: Summary Dual EPS Presentation
Basic EPS
Net income adjusted for interest (net of tax) and preferred dividends Weighted average number of common shares assuming maximum
Diluted EPS
Dilutive Dilutive Options and Warrants Dilutive Contingent Issues
Earnings Per Share-Complex Capital Structure Diluted EPS includes the effect of all potential dilutive common shares that were outstanding during the period.
Illustration 16-17
Companies will not report diluted EPS if the securities in their capital structure are antidilutive
DPS • DPS is the earnings distributed to ordinary shareholders divided by the number of ordinary shares outstanding
FORMULA OF DPS • DPS=Earning paid to shareholders (dividends) Number of ordinary shares outstanding
• DPS,the amount of dividend that a stockholder will receive for each share of stockheld.It can be calculated by taking the total amount of dividend paid and dividing it by the total share outstanding. • If a company issue a $1 million dividend and has 10 million share, the dividend pershare
ABOUT DPS • Dividend per share does not usually need to be calculated by investors as it is usually disclosed. Careless readers may sometimes confuse the final dividend with the total paid over the year. • Dividends are paid to holders of shares on the record date which will be announced beforehand by the company. More important from an investor's point of view is the ex-dividend date on, and after, which shares bought or sold on a stock exchange under normal terms will be sold without the dividend (so that the seller will get the dividend). • Companies may pay interim dividends during the year as well as a final dividend. These should all be added together to get the total
Preferred Stock Included in Capital Structure • Basic EPS reflects only income available to common stockholders; it does not include preferred stock. • Dividends on preferred stock should be deducted from income before extraordinary or other special items from net income for EPS, if preferred stock is in the capital structure.
Stability of dividend • In India,companies announce dividend as per cent of the paidup capital per share. This can be converted into DPS. • When the company reaches new level of earning & expects to maintain them,the annual dividend per share or dividend rate may be increased.(prosperity)
Multiple Potentially Dilutive Securities
• Remember that preferred dividends were initially subtracted from income to arrive at income available to common shareholders.
• When we assume conversion of the preferred stock, those dividends must be added back.
CAUTIO
thank…..u
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