Earnings per share (EPS) is the most featured, single financial statistic about modern companies. Daily published quotations of the share prices have recently been expended to include for many securities a times earnings figure that is based on EPS. Securities analysts often focus their discussions on EPS of the companies they study.

Required:

(a) Explain how dividends on outstanding preference shares affect the computation of basic EPS and diluted EPS. (8 marks)

(b) Explain the treasury-share method as it applies to options and warrants in computing diluted EPS data. (4 marks)

(c) Convertible debentures are considered potential ordinary shares. Explain how convertible debentures are handled for the purposes of diluted EPS computation. (4 marks)