EPS Calculation

Estimate EPS as: [(sales per share)(EBITDA %) – depreciation per share – interest per share][1 – tax rate] Why can’t you just take Net Income - preferred dividends / number of shares outstanding?

You could but you would be better off including estimates for sales, gross margin, depreciation, interest and tax rate in your estimate rather than trying to pull a number for NI out of the air. This way will be more accurate.

You surely can. It all depends on what you are given on the exam day.

i am only familiar with (NI-preferred)/ #shares outstanding. :\ don’t think i came across the first version much when studying from schweser… although i follow the formula. is that from CFAI?

Yea, its in the Scheweser: EQUITIES: Company Analysis and Stock Valuation. Page 212. I think the way to approach EPS calculation is to see what is given in the question. So there will be 2 ways to calculate this ratio.