How do you calculate the earnings per share for Target Corporation Fiscal year 2017 and 2016? some other information provided was undiluted for 2017 $5.35 and diluted for 2017 was $5.31? thanks
This is in regards to Ratio analysis; So I have to figure out the earnings per share for Target Corporation Fiscal Year 2017 and 2016. #52
|52. Earnings per share||Undiluted||$5.35||($2.58)||(NOTE: from the annual reports)|
|Formula:||Net earnings available for common stock / average number of shares outstanding|
Ans: The information provided in the question is not suffecient.
I understand that you need a clarity on the calculation of diluted and undiluted EPS.
As we see, the values are already calculated. But there is a difference between Basic and diluted EPS
1. Undiluted EPS or simply EPS is the company's total income minus any preferred dividends, divided by the number of outstanding shares.
So if the net profit of a company is $100,000 and the shares outstanding are $2,000 the EPS of the company is 100,000 / 2,000 = $50.
2. Diluted EPS is more detailed than EPS. Suppose the Company has convertible bonds or stock options that can be exercised, the numbers of shares would increase on conversion and exercise of rights and therefore earnings per share will dilute.Basically diluted EPS determines what would happen when diluted securities are exercised.
Hence diluted EPS = net profit / number of shares adjusted for future dilutions
Even the earnings need to be adjusted.
Interest expense. The conversion would eliminate the company’s liability for the interest expense.
Dividends. Adjust for the after-tax impact of dividends.
The reason for stating diluted earnings per share is so that investors can determine how the earnings per share attributable to them could be reduced if a variety of convertible instruments were to be converted to stock. Thus, this measurement presents the worst case for earnings per share.