• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

Congratulations to Jamil from Pakistan and Jeeva from Malaysia - Global Prize winners!
see all ACCA December 2022 Genius Hunt Competition winners >>

Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>

Limitations of EPS

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Limitations of EPS

  • This topic has 1 reply, 2 voices, and was last updated 11 months ago by P2-D2.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • February 11, 2022 at 11:40 am #648463
    Isabella1
    Member
    • Topics: 42
    • Replies: 20
    • ☆☆

    Hello P2-D2,
    I am unable to understand these two limitations of EPS. If you explain so it would be amazing.

    (A) DEPS is only additional measure of past performance despite looking at future potential shares.
    I am unable to understand this completely.

    (B) EPS cannot be used as bases of comparison between companies as the number of shares in issues in any particular company is not related to the amount of capital employed but one company has 100,000 $1 shares in issue and reserves of $4900000, Another company has 5 million 50 cents Shares in issue and reserves of $2500000. If earnings are same, EPS is different.
    In this if we take Earnings of $200000 so Company A would give EPS of $2/share and Company B would give 40 cents/share. So it is giving different EPS but why is he telling about capital employed and reserves? Please explain this.

    I am unable to understand this importance of DEPS also.
    “It can be used to assess trends in past performance.”

    February 20, 2022 at 9:16 am #648950
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6473
    • ☆☆☆☆☆

    Hi

    (A) DEPS is trying to give an insight into the future by looking at the potential impact on the EPS figure once instruments are converted into shares but it is still base upon past performance as it takes the current earnings as the figure in the calculation. the earnings figure is a past performance indicator, it does not highlight what will happen in the future.

    (B) You are being told about the capital employed and reserves to identify the number of shares that are in issue that are then to be used in the EPS calculation.

    Hope that helps clear it up.

    Thanks

  • Author
    Posts
Viewing 2 posts - 1 through 2 (of 2 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

ACCA News:

 

ACCA My Exam Performance for non-variant Applied Skills exams is available NOW

NEW! Download the ACCA Pass Guide

FREE Verifiable CPD for ACCA Members

ACCA mock exams and debrief videos

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

Donate

If you have benefited from OpenTuition please donate.

ACCA CBE 2023 Exams

Instant Poll * How was your exam, and what was the result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Specially for OpenTuition students

20% off BPP Books

Get BPP Discount Code

Latest comments

  • John Moffat on Introduction to Financial Accounting – ACCA Financial Accounting (FA) lectures
  • John Moffat on PM Chapter 13 Questions Standard Costing and Basic Variance Analysis
  • abdallah254 on FA Chapter 2 Questions The Statement of Financial Position and Statement of Profit or Loss
  • Iby2012 on Introduction to Financial Accounting – ACCA Financial Accounting (FA) lectures
  • Iby2012 on Introduction to Financial Accounting – ACCA Financial Accounting (FA) lectures

Copyright © 2023 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in


We use cookies to show you relevant advertising, find out more: Privacy Policy · Cookie Policy