Question

an analyst gathered the following data about a company: 1,000 common shares are outstanding (no change during the year). net income is $5,000. the company paid $500 in preferred dividends. the company paid $600 in common dividends. the average market price of their common stock is $60 for the year. the company had 100 warrants (for one share each) outstanding for the entire year, exercisable at $50. the company's diluted earnings per share is closest to: a)

Answer 1

The company's diluted earnings per share is $4.09

What is Diluted Earnings per share?

A metric known as "diluted EPS" is used to assess how well a company's earnings per share (EPS) would perform if all convertible securities were exercised. The entire circulating supply of convertible preferred shares, convertible debentures, stock options, and warrants are considered convertible securities. Take a company's net income to determine diluted EPS.

Net income - any preferred/ by the sum of the weighted average number of shares outstanding and dilutive shares (convertible preferred shares, options, warrants, and other dilutive securities).

$5000-$500/1,100= $4.09

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