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just running thruogh this again, and Ive noticed that the shares for 14% debentures are 2 million, but shouldnt they be 200K??
this makes the whole question wrong – someone correct me if Im wrong and tell me why??/
Quote:just running thruogh this again, and Ive noticed that the shares for 14% debentures are 2 million, but shouldnt they be 200K??this makes the whole question wrong – someone correct me if Im wrong and tell me why??/
Hello !
I think you are talking about Ardent Co. in Chapter 18 – Earnings per share on page 298.
First of all, diluted earnings per share (DEPS) is related to:
1. Convertible Bonds / Convertible Loan Stock
2. Convertible Preference Shares
3. Share Options
4. WarrantsPS:
Quote:14% debenturesSecondly, the number of shares on conversion of 14% Convertible Loan Stock would be 1,200,000 shares ($2,000,000 x 3/5)
Thirdly, converting the 14% loan stock would result in incremental EPS of $0.455 (45.5c – if you wish), which is greater than the basic EPS of $0.35 (35c). Hence, the 14% loan stock is not dilutive and is therefore excluded from the diluted EPS calculation.
HTH
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