Diluted earnings per share and Reserves: Difference between pages

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imported>Doug Williamson
(Simplify narrative.)
 
imported>Doug Williamson
(Added numbering to the two definitions and more spacing)
 
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(Diluted EPS).  
1.  


Diluted earnings per share are calculated as:
''Accounting''. 


Profit attributable to ordinary shareholders ÷ Diluted weighted average number of shares in issue during the period.
Reserves represent the amount of money ‘owed’ to the owner (shareholder) of the company.


Profit after tax attributable to ordinary shareholders is often known as 'earnings' or 'net profit'.
In a profitable and conservative company, reserves will normally comprise a significant balance of accumulated undistributed profits.




<span style="color:#4B0082">'''''Diluted EPS example'''''</span>
2.


Earnings for the period are £40 million and the diluted number of shares is 52 million.
''Banking''.


EPS = £40m / 52m
Deposits maintained by non-[[central bank]] [[monetary financial institution]]s with their central bank in the latter's capacity as 'the bankers' bank'. Central banks may require institutions to maintain minimum balances with the central bank, in which case balances in excess of the minimum are known as 'excess reserves'.


= £0.77 (= 77 pence)
Of course banks publish accounts and use the term in the accounting sense also - do not be confused by this.
 
 
'Diluted' earnings per share are calculated by adjusting the earnings and number of shares for the effects of 'dilution' of the current ordinary shareholders' entitlements.
 
 
'Dilution' is defined in IAS 33 as:
 
The reduction in EPS assuming that the number of shares increases because:
#Convertible instruments are converted,
#Options or warrants are exercised, or
#Ordinary shares are issued on the satisfaction of specified conditions.
 
 
Relevant accounting standards include IAS 33 and Section 1 of FRS 102.




== See also ==
== See also ==
* [[Convertible debt]]
* [[Interest on excess reserves]]
* [[Dilution]]
* [[Merger reserve]]
* [[Earnings]]
* [[Official reserves]]
* [[Earnings per share]]
* [[Reserve requirements]]
* [[IAS 33]]
* [[Special drawing rights]]
* [[FRS 102]]
* [[Trapped cash]]
* [[Option]]
* [[Warrant]]


[[Category:Corporate_finance]]
[[Category:Long_term_funding]]

Revision as of 09:44, 30 May 2015

1.

Accounting.

Reserves represent the amount of money ‘owed’ to the owner (shareholder) of the company.

In a profitable and conservative company, reserves will normally comprise a significant balance of accumulated undistributed profits.


2.

Banking.

Deposits maintained by non-central bank monetary financial institutions with their central bank in the latter's capacity as 'the bankers' bank'. Central banks may require institutions to maintain minimum balances with the central bank, in which case balances in excess of the minimum are known as 'excess reserves'.

Of course banks publish accounts and use the term in the accounting sense also - do not be confused by this.


See also

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