This is income available to common shareholders divided by the number of common shares outstanding at year end. The number of common shares used for the calculation of basic earnings per share should be the weighted average number of common shares outstanding during the year, not the number of common shares outstanding at year end.
This is net income divided by the weighted average number of common shares outstanding during the year. Basic earnings per share is income available to common shareholders (net income minus preferred dividends) divided by the weighted average number of common shares outstanding during the year.
Basic earnings per share is income available to common shareholders (net income minus preferred dividends) divided by the weighted average number of common shares outstanding during the year. The number of common shares outstanding on January 1 was 10,000. Those shares were outstanding all year, so their weighted average for the year was 10,000 / 12 × 12 = 10,000. On June 1, the company issued an additional 2,000 shares of common stock for cash. Those shares were outstanding for 7 months out of the year, so their weighted average for the year was 2,000 / 12 × 7, which equals 1,167. Since that was the only common stock transaction, the weighted average number of common shares outstanding for the year was 10,000 + 1,167, which equals 11,167. The preferred dividend was 5,000 × $100 × .06, which equals $30,000. Therefore, income available to common shareholders was $120,000 ? $30,000, or $90,000. Basic earnings per share for the year were $90,000 / 11,167 = $8.059 or $8.06.
This is net income divided by the number of common shares outstanding at year end. Basic earnings per share is income available to common shareholders (net income minus preferred dividends) divided by the weighted average number of common shares outstanding during the year.
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