guys, you know how when you’re calcing basic EPS the forluma is: (NI - preferred dividends) / wght ave # of common shares and if you want to do diluted EPS, if there’s only pref shares in the capital structure, then the formula is: (NI - pref dividends + pref dividends) / (wght ave # common shares + preferred shares) How come sometimes they don’t add back the preferred dividends in the nominator, but only subtract them (e.g. Q65, book 6, test 1, PM)? thanks.
lola, me getting (15K - 10K + 3.6K)/(2K + 5K) = 1.22857 The reason you don’t back out Preferred dividends from Net Income is because they are not convertible, so you still need to pay the preferred stockholders and money gone to them is money not available to common stock holders. - Dinesh S