Wiley 423 Week 2 Assigment
In order to determine the number of shares used to compute diluted earnings per share for the year ended December 31, 2013, it is first necessary to look at the company’s financial statements. We will be focusing on the statement of retained earnings, which details all income and expenses as well as dividends received during that period. This statement will help us determine which items need to be considered when computing diluted earnings per shares, such as preferred stock or convertible debt.
The next step is to determine how many shares additional would have been issued if those items were converted into common stock, at the market price on December 31st. This can be done by multiplying each item’s conversion rate by its market price on that date and then adding up all of these totals. After all calculations are completed we can add this number to the previously calculated weighted-average number of common shares outstanding. This will calculate our total share count for computing diluted PE for that period.