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which doesn't count stock options, warrants, and convertible securities and fully DILUTIVE EARNINGS PER SHARE which includes those securities.

Computation of EPS is usually straight forward: net income minus preferred stock dividends (Net income available to common stockholders) is divided by the number of weighted average of common shares outstanding. For instance a corporate reports net income of $350,000 and declares and pays preferred dividends of $50,000 for the year. The weighted average number of common stock outstanding during the year is 100,000 shares. EPS is $ $3.00, as computed:

Net income preferred dividends

___________________________

Number of Weighted Average of common shares outstanding

= Earnings Per Share

Using the figures above:

$350,000 $50,000

_______________ = $3.00

100,000

This EPS is earned by each share of common stock, or allocated to each share of common stock, and IS NOT the dollar amount paid to stockholders in the form of dividends. As mentioned, EPS is required to be disclosed on the face of the Income Statement of a company's reports. Companies with additional components: discontinued operations, extraordinary item, or cumulative effect of a change in accounting principle must report per share amount for these line items either on the face of the Income Statement or in the notes of the Financial Statements.

HERE ARE THE STEPS FOR CALCULATING EPS (material from Intermediate Accounting Text)

STEP ONE: Compute the weighted average number of common stock shares outstanding.

A. When common shares are issued for assets during the period, weight them according to the length of time in the period the stock is outstanding in relation to the total time in the period.

B. When common shares are issued in connection with a stock split or stock dividend declared during the period, give retroactive treatment to these shares. Give retroactive treatment even if the stock dividend or split is declared after the end of the period but before the financial statements are published. Restate EPS in Financial Statements for prior periods presented.

Here is how:

FIRST: Begin with the number of common shares outstanding at the beginning of the period. Assume they were outstanding the entire year; multiply the number by 12/12 to get an equivalent amount. Enter the equivalent amount in the weighted average column.

SECOND: Take the first transaction that occurred during the year that changed the number of shares outstanding and properly adjust the balance in

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