Owners’ Equity Paper

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Basic Earnings per Share

Basic Earnings per Share is a measurement in which the amount of a company’s profit is determined on a per share basis. According to "The Street" (1996-2016), Basic Earnings per Share are determined dividing the net income at the end of a specific period by the number of common shares at the end of that same period. This information can easily be found on the company’s income statement. This method only takes into account the company’s common shares.

Diluted Earnings per Share

Diluted Earnings per Share is a measurement in which the amount of a company’s profit is determined on a per share basis but takes into account all convertible securities of the company. This method is considered a “performance metric used to gauge the quality of a company's earnings per share (EPS) if all convertible securities were exercised”, ("Diluted Earnings Per Share - Diluted EPS," 2016).

Investors and Earnings per Share

As an investor it is more important to know a company’s diluted earnings per share. Diluted Earnings per Share will provide an investor with the most accurate depiction of a company’s financial health in order to make informed business and investment decisions.

Conclusion

The accounting and financial reporting of capital and earnings per share are imperative to the success of a company and its investors. This information is heavily relied upon by many and for numerous reasons. Business and investing decisions are made with this information for both current and future activities.

Investors need information for two different purposes, that of the company they are investing in and that of the expectations they have for their own investment. There needs to be a sense of security and a good return for investors.

References

Diluted Earnings Per Share - Diluted EPS. (2016). In Investopedia. Retrieved from http://www.investopedia.com/terms/d/dilutedeps.asp

Earned capital. (2016). In Accounting Tools. Retrieved from http://www.accountingtools.com/questions-and-answers/what-is-earned-capital.html

Paid in capital. (2016). In Investopedia. Retrieved from http://www.investopedia.com/terms/p/paidincapital.asp

The Street. (1996-2016). Retrieved from http://www.thestreet.com/topic/46045/basic-

earnings.html