CFA CFA Level 1 Diluted EPS question

Diluted EPS question

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      Hey @pcweldon‌ , I don’t fully follow your question.

      As you can see from the Basic EPS calculation, preferred dividends of 225,000 was subtracted. In the case of diluted EPS, preferred dividends are not paid (as it’s assumed converted into stock), hence the equation becomes (in this case) = (Net income less non-convertible shares dividends) / (WASO+new shares for convertible stock).

      The convertible preferred stock’s dividend is in fact ‘added’ back to the numerator (vs. basic eps, that’s why you don’t see any subtraction of that here since as you say it’s converted to stock). Does this make sense?

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      oh my… that’s embarrassing… thank you very much! I’m going to go with the, “I needed someone else to explain it for it to make sense” excuse! Thanks again Sophie!

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      Dude, no worries at all @pcweldon‌. There’s no such things as embarrassing questions here. I know that than annoying mistakes in the real exams!

      Thanks for sharing your thought process with the community though, anti dilutive / dilutive EPS is always one of those things that seems easy (and people underestimate it) but CFAI loves testing it with twists and turns.

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