Becker Chapter 7 question 7/27
In the calculation of EPS- Becker's answer did not subtract the Preferred divs paid from Net Income to calculate basic EPS?
Can some one help me?
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David1985
offlineMemberSherrid,
When you have cumulative preferred stock you only deduct that year’s dividend, even if it’s not paid.
So, if they paid for 2 years worth of dividends this year you only deduct for one, because last year’s portion was deducted from last year’s EPS. It’s like matching expenses to correct period. Cash outflow is not relevant. You can ignore what they paid and calculate what cumulative preferred earned this year and deduct that amount.Payment or declaration of payment only meters when it’s non cumulative preferred stock.
That’s how I understand it. Hey you might be taking an advice from somebody who got 52 on his exam. :)
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