The correct answers are:
The calculation of EPS becomes more complex;
Total earnings will change;
The previous year’s EPS figure is no longer comparable.
The EPS calculation has to be adjusted to take account of the new weighted average of total shares as well as the price of new shares issued compared to the full market price.
You might expect total earnings to change, as the extra capital raised would be expected to generate more profits.
The previous year’s EPS would not be comparable if no adjustment was made for the impact of the issue of new shares.
The issue of bonus shares raises no new capital so it has no impact on the earnings capacity of the company. The bonus shares issued are added to the current year’s number of shares and comparative figures so a bonus issue has no impact on any change in the EPS figure. Also, previous years figures are restated.
