Two companies each make a profit of ₦5 million. One has a million shares and the other has ten million. Which is doing better for its owners? Earnings per share (EPS) answers that by sharing the profit across the shares. The price/earnings (P/E) ratio then compares the share price with those earnings, so investors can tell whether a share looks cheap or dear.
This topic covers International Accounting Standard (IAS) 33: basic EPS, the weighted-average number of shares, bonus and rights issues, splits, buy-backs, partly-paid shares, diluted EPS for convertibles, options and contingently issuable shares, presentation, and the limits of EPS as a measure. The previous topics covered cash flows. The next topic covers the analysis of financial statements. The latest Pathfinder diets have no stand-alone EPS question, but it is examinable.
In 30 seconds
Basic EPS = profit attributable to ordinary shareholders ÷ weighted-average ordinary shares. The profit is after tax, after the non-controlling interest (NCI) and after equity-classified preference dividends (cumulative ones whether declared or not). Shares issued at full price are time-weighted from the date the money is receivable. Bonus issues, splits and consolidations are treated as if they happened at the start of the earliest period, with comparatives restated.
A rights issue has a bonus element: multiply the earlier shares by market price before ÷ TERP (theoretical ex-rights price). Diluted EPS adds the effect of potential ordinary shares: convertibles (add back after-tax interest or dividends, add the shares), options (treasury share method: shares issued less shares bought back at the average price) and contingently issuable shares. Include an instrument only if it reduces EPS, testing the lowest incremental EPS first.
Key terms in plain English
| Term | What it means |
|---|---|
| Ordinary share | The class that ranks last for profit and capital |
| Potential ordinary share | An instrument that may give the holder ordinary shares in future |
| Dilution | A fall in EPS if potential shares became ordinary shares |
| Anti-dilution | A rise in EPS on conversion. Such instruments are ignored |
| Weighted average | The shares weighted by the time they were in issue |
| Bonus factor | The multiplier applied to earlier shares for a bonus element |
| Incremental EPS | The extra earnings divided by the extra shares for one instrument |
Syllabus check
IAS 33 is examinable under syllabus area C. This topic covers:
- the calculation of basic and diluted EPS, and the restatement of comparatives;
- the presentation and disclosure of EPS, and its use as a performance measure.
CAMA 2020 and earnings per share
The Companies and Allied Matters Act 2020 (CAMA 2020) requires statements that follow International Financial Reporting Standards (IFRS) and give a true and fair view.
| Section | What it says | Link to this topic |
|---|---|---|
| s. 377(1) and s. 378 | Directors prepare statements that follow IFRS and give a true and fair view | EPS is presented under IAS 33 |
| ss. 379 to 381 | The provisions on group accounts, as ICAN teaches them | A listed group gives EPS on the consolidated figures |
| s. 374(1) | The company keeps accounting records | Share records support the share counts |
| s. 385 | The directors’ report covers performance and risk | EPS trends and share changes are discussed |
| s. 404(7) | The audit committee reviews policies and internal control | It can review the EPS workings |
Scope and the earnings figure
IAS 33 applies to entities whose ordinary shares (or potential ordinary shares) are traded in a public market or are about to be offered to the public. A listed group gives EPS on the consolidated figures only.
| Situation | Earnings used for basic EPS |
|---|---|
| Single entity, no preference shares (or liability-classified) | Profit for the year |
| Equity-classified preference shares | Profit after tax less the preference dividend |
| Group | Profit attributable to the owners of the parent (after the NCI), less preference dividends |
| Discontinued operations | Also show EPS on profit from continuing operations |
A preference share that is a liability under IAS 32 has its dividend in finance costs, so no adjustment is needed. For an equity preference share, deduct the dividend: for non-cumulative shares only if declared for the period, for cumulative shares whether declared or not.
Basic EPS: the share count
| Event | Treatment |
|---|---|
| Issue or buy-back at full price | Time-weight from the date consideration is receivable or payable. No restatement of comparatives |
| Bonus issue, split, consolidation | As if it had happened at the start of the earliest period shown. No time weighting. Restate comparatives |
| Rights issue (below market price) | Bonus element: multiply earlier shares and comparatives by market price before ÷ TERP. Full-price element: time-weight |
| Treasury shares | Exclude from the date of the buy-back until reissued. No restatement |
| Partly-paid shares | Count at the fraction paid (if dividends follow the amount paid) and time-weight later calls |
TERP = total value of all shares after the issue ÷ total number of shares, where the value is the old shares at the market price plus the new shares at the issue price. Restate a comparative EPS by dividing by the bonus factor (for a bonus issue of 1 for 10 divide by 1.10).
Diluted EPS
Only dilutive potential shares are included.
- Convertibles (loan stock or preference shares): add back the interest after tax (or the preference dividend, which has no tax effect) and add the shares issued on conversion, time-weighted if issued in the year. If there are several conversion rates, use the one that gives the most shares.
- Options and warrants: the earnings do not change. Shares issued on exercise less the shares that could be bought back with the proceeds at the average market price. Options are dilutive only if the exercise price is below the average price.
- Contingently issuable shares (issued if a condition is met): include them if the condition would be met if the reporting date were the end of the contingency period (for a profit target use the results to date; for a share price target use the price at the reporting date). Earnings do not change.
Ranking
Calculate the incremental EPS of each instrument (extra earnings ÷ extra shares). Include them from the lowest incremental EPS upwards, one at a time, and stop when diluted EPS stops falling. An instrument with an incremental EPS above the running EPS is anti-dilutive and is left out.
Presentation and disclosure
- Basic and diluted EPS on the face of the statement of profit or loss with equal prominence, for profit attributable to ordinary shareholders and for continuing operations, for the current and comparative years. A loss per share is also shown.
- EPS for a discontinued operation is on the face or in the notes.
- A note reconciles the earnings and the share numbers used, lists the anti-dilutive instruments left out, and describes share transactions after the reporting date that would have changed the share count.
- An alternative EPS (for example before exceptional items) is only in the notes, uses the same share count and is reconciled to the statutory profit.
EPS as a performance measure
Users watch the trend. Continuing-operations EPS strips out discontinued results, and diluted EPS warns of future dilution. But EPS has limits:
- accounting policy differences reduce comparability
- it ignores inflation and cash flow
- it is a narrow measure
- it can be managed (for example by buy-backs)
- diluted EPS is still based on past earnings
Use it with cash flow per share, return on equity and gearing.
The rules in more depth
Why bonus shares are restated and full-price shares are not
A bonus issue brings in no money, so nothing about the business has changed. Only the number of shares has. A full-price issue brings in money that earns profit from that date, so the shares are counted from that date.
Why a rights issue has a bonus element
Shares sold below the market price transfer some value to the holders who take them up. That part works like a bonus issue.
Why only dilutive instruments count
Diluted EPS is meant to be a worst case. An instrument that would raise EPS cannot make things worse.
Effect on analysis
A fall in EPS after a buy-back reverses is not poor trading. Always check the share count first.
Worked examples
Example 1: preference shares. Arsenal Plc has 1,000,000 ordinary shares in issue all year and profit after tax of ₦5,000,000. It also has 8% preference shares of ₦20,000,000.
- No preference shares, or preference shares classified as a liability: ₦5,000,000 ÷ 1,000,000 = ₦5.00.
- Preference shares classified as equity.
dividend = 8% × 20,000,000 = 1,600,000.
EPS = 3,400,000 ÷ 1,000,000 = ₦3.40.
Example 2: a full-price issue. The same company issued 200,000 shares at full market price on 1 April.
- Weighted average.
1,000,000 + 200,000 × 9/12 = 1,150,000. - EPS = 5,000,000 ÷ 1,150,000 = ₦4.35.
Example 3: a bonus issue. The company makes a 1 for 10 bonus issue on 1 April. The EPS reported for the previous year was ₦4.58.
- Shares = 1,000,000 × 1.10 = 1,100,000 (no time weighting).
- EPS = 5,000,000 ÷ 1,100,000 = ₦4.55.
- Restated comparative.
4.58 ÷ 1.10 = ₦4.16.
Example 4: a rights issue. On 1 April the company issues 200,000 shares to existing holders at ₦4.10. The market price before the issue was ₦4.50. The EPS reported for the previous year was ₦4.36.
- TERP = (1,000,000 × 4.50 + 200,000 × 4.10) ÷ 1,200,000 = 5,320,000 ÷ 1,200,000 = ₦4.43.
- Bonus factor.
4.50 ÷ 4.4333 = 1.0150. - Weighted average.
1,000,000 × 1.0150 × 3/12 (253,759) + 1,200,000 × 9/12 (900,000) = 1,153,759. - EPS = 5,000,000 ÷ 1,153,759 = ₦4.33.
Comparative = 4.36 ÷ 1.0150 = ₦4.30.
Example 5: a consolidation and a split. (a) Arsenal had 10 million shares and did a 1 for 5 consolidation on 1 July 2024. Profit was ₦12,000,000 in 2024 and ₦9,000,000 in 2023. (b) Spurs had 3 million shares and did a 2 for 1 split on 1 April 2024. Profit was ₦15,000,000 and ₦11,400,000.
- (a) Shares = 10m ÷ 5 = 2m for both years: 2024 EPS = 12,000,000 ÷ 2,000,000 = ₦6.00
2023 = 9,000,000 ÷ 2,000,000 = ₦4.50. - (b) Shares = 3m × 2 = 6m for both years: 2024 = 15,000,000 ÷ 6,000,000 = ₦2.50
2023 = 11,400,000 ÷ 6,000,000 = ₦1.90.
Example 6: cumulative preference shares and continuing operations. Profit is ₦3,000,000 from continuing operations and ₦500,000 from discontinued operations. There are 1,000,000 ordinary shares. Preference shares classified as equity carry a dividend of ₦65,000.
- Continuing.
(3,000,000 − 65,000) ÷ 1,000,000 = ₦2.94. - Discontinued.
500,000 ÷ 1,000,000 = ₦0.50. - Total.
3,435,000 ÷ 1,000,000 = ₦3.44. - If the preference shares were cumulative with a 10% dividend on ₦1,000,000 and no dividend was declared, the ₦100,000 is still deducted.
Example 7: a buy-back and several issues. (a) Arsenal bought back 200,000 of its 1,000,000 shares on 1 April at full price. (b) Another company had 5,000,000 shares and issued 1,000,000 on 1 April, 1,000,000 on 1 July and 500,000 on 1 November, all at full price.
- (a) Weighted average = 1,000,000 × 3/12 + 800,000 × 9/12 = 850,000.
EPS = 5,000,000 ÷ 850,000 = ₦5.88. - (b) 5,000,000 × 3/12 + 6,000,000 × 3/12 + 7,000,000 × 4/12 + 7,500,000 × 2/12 = 1,250,000 + 1,500,000 + 2,333,333 + 1,250,000 = 6,333,333.
Example 8: NCI. Profit is ₦3,000,000 from continuing and ₦500,000 from discontinued operations. The NCI holds 20% of the subsidiary.
- Continuing.
owners 80% × 3,000,000 = ₦2,400,000.
Discontinued: 80% × 500,000 = ₦400,000.
Total ₦2,800,000. - If the NCI held 20% in the continuing part and 30% in the discontinued part: continuing 2,400,000 and discontinued 350,000, a total of ₦2,750,000.
Example 9: partly-paid shares. There are 6,000,000 shares at the start, of which 1,000,000 are paid to 75%. On 1 April the other 25% is received. Profit is ₦24,750,000.
- Opening equivalent.
5,000,000 + 1,000,000 × 75% = 5,750,000.
After the call: 6,000,000. - Weighted average.
5,750,000 × 3/12 (1,437,500) + 6,000,000 × 9/12 (4,500,000) = 5,937,500. - EPS = 24,750,000 ÷ 5,937,500 = ₦4.17.
Note: ICAN’s working starts from 6,000,000 shares, adds 250,000 after the call and gets ₦4.00. That does not follow its own rule that a partly-paid share counts at the fraction paid, if the 1,000,000 are part of the 6,000,000. Our answer is slightly different from ICAN’s. In the exam, follow the rule and set out the opening count.
Example 10: convertible loan stock. Uri Plc has 1,000,000 shares and profit of ₦4,600,000. It has 8,000 convertible bonds of ₦100 at 5% interest, each convertible into 2 shares. Tax is 40%.
- Basic EPS.
4,600,000 ÷ 1,000,000 = ₦4.60. - Interest = 800,000 × 5% = 40,000; after tax 24,000.
Shares = 8,000 × 2 = 16,000. - Incremental EPS.
24,000 ÷ 16,000 = ₦1.50, below ₦4.60, so dilutive. - Diluted EPS.
4,624,000 ÷ 1,016,000 = ₦4.55. - If the 8% debentures of ₦10m had several conversion rates (35, 55, 40 or 30 shares per ₦1,000), use the one giving the most shares (55): 10,000 notes × 55 = 550,000 shares
interest 800,000 × 70% = 560,000
diluted EPS = (1,800,000 + 560,000) ÷ 1,550,000 = ₦1.52.
If they were issued on 1 April, use 9/12 for both interest (420,000) and shares (412,500): 2,220,000 ÷ 1,412,500 = ₦1.57.
Example 11: two convertibles. Gbemski Plc has 5,000,000 shares and profit of ₦1,750,000. It has ₦1m of 14% loan stock (2 shares per ₦10) and ₦2m of 10% loan stock (3 shares per ₦5). Tax is 35%.
- Basic EPS.
1,750,000 ÷ 5,000,000 = ₦0.35. - 14% stock: interest 140,000 × 65% = 91,000; shares 200,000; incremental EPS = ₦0.46, above 0.35, so anti-dilutive.
- 10% stock: interest 200,000 × 65% = 130,000; shares 1,200,000; incremental EPS = ₦0.11, so dilutive.
- Diluted EPS.
(1,750,000 + 130,000) ÷ 6,200,000 = ₦0.30.
Example 12: options and contingently issuable shares. (a) FinPolNomics has 2,000,000 shares, profit of ₦3,000,000 and 100,000 options at an exercise price of ₦2. The average price is ₦5. (b) Faramade has 1,000,000 shares and profit of ₦5,000,000. It promised 10,000 shares to one director on 1 January 2026 if the average profit for 2023 to 2025 is at least a target. Profit for 2023 and 2024 totals ₦9,000,000.
- (a) Proceeds 200,000; shares bought back 200,000 ÷ 5 = 40,000; incremental 60,000.
Basic EPS = ₦1.50.
Diluted EPS = 3,000,000 ÷ 2,060,000 = ₦1.46. - (b) The average to date is ₦4,500,000. If the target is ₦6,000,000 the condition would not be met, so the shares are excluded (diluted EPS stays ₦5.00).
If the target is ₦4,000,000 the condition would be met, so include them: 5,000,000 ÷ 1,010,000 = ₦4.95.
Basic EPS ignores them until the condition is met. - A share price condition: Company M must issue 1,000,000 shares to a vendor if the price is ₦500 or more on 30 June next year. The price at the year end is ₦600, so include them.
Basic EPS = 100,000,000 ÷ 12,000,000 = ₦8.33.
Diluted EPS = 100,000,000 ÷ 13,000,000 = ₦7.69.
Note: ICAN calls the unmet-target case “anti-dilutive”. It is excluded because the condition is not met, not because it raises EPS. ICAN also says contingently issuable shares rank after options and before convertibles. The rule in IAS 33 is to rank all instruments by incremental EPS.
Example 13: ranking three instruments. Dynamics Plc has 6,000,000 shares and earnings of ₦18,000,000. The average price is ₦70. It has 800,000 options (exercise price ₦52.50), ₦6m of 5% convertible bonds (30 shares per ₦100) and 200,000 8% convertible preference shares of ₦10 (1 share per 25 preference shares). Tax is 30%.
- Basic EPS = ₦3.00.
- Options.
proceeds 42,000,000 ÷ 70 = 600,000 bought back; incremental shares 200,000; incremental EPS = ₦0.00. - Bonds.
interest 300,000 × 70% = 210,000
shares 60,000 × 30 = 1,800,000
incremental EPS = ₦0.12. - Preference shares: dividend 160,000 (no tax effect); shares 8,000; incremental EPS = ₦20.00, so anti-dilutive.
- Diluted EPS.
(18,000,000 + 210,000) ÷ (6,000,000 + 200,000 + 1,800,000) = 18,210,000 ÷ 8,000,000 = ₦2.28.
Example 14: a complex year (Faramola Plc, year to 31 March 2020). Opening 1,000,000 shares. On 1 July 100,000 shares were issued at full price. On 31 July 20,000 were bought back. On 30 September a 2 for 5 rights issue was made at ₦3.90 when the market price was ₦4.35. On 1 January there was a 1 for 10 bonus issue. Profit is ₦5,000,000. 50,000 options were granted on 1 October at ₦3.20.
- TERP = (5 × 4.35 + 2 × 3.90) ÷ 7 = ₦4.2214.
Rights factor = 4.35 ÷ 4.2214 = 1.03046.
Bonus factor = 1.10. - Shares before the rights issue are multiplied by 1.03046 × 1.10 and then time-weighted: 1,000,000 × 3/12 = 283,376
1,100,000 × 1/12 = 103,904
1,080,000 × 2/12 = 204,030. - After the rights issue.
1,512,000 × 1.10 = 1,663,200 for 6 months in two parts of 3 months: 415,800 + 415,800. - Weighted average = 1,422,910.
Basic EPS = 5,000,000 ÷ 1,422,910 = ₦3.51. - Options.
proceeds 160,000 ÷ 4.35 = 36,782 bought back
incremental 13,218 × 6/12 = 6,609.
Diluted EPS = 5,000,000 ÷ 1,429,519 = ₦3.50.
How to score full marks
- Start with the earnings and show each deduction.
- Set out a share schedule with dates, share counts, factors and time fractions.
- Decide the type of each share event (full price, bonus, rights, split) before you calculate.
- Restate comparatives for bonus elements, and say so.
- Test each potential share with its incremental EPS and rank them.
- Present both EPS figures and list the anti-dilutive instruments.
- Comment on the trend if the question asks for interpretation.
Common mistakes in the exam
- Using the closing number of shares and not the weighted average.
- Time-weighting a bonus issue.
- Not restating the comparative EPS.
- Ignoring the bonus element in a rights issue.
- Forgetting preference dividends, or deducting a liability-classified dividend twice.
- Adding back interest before tax.
- Including an anti-dilutive instrument.
- Using the closing price and not the average price for options.
Quick revision
- Basic EPS: earnings (after NCI and equity preference dividends) ÷ weighted-average shares.
- Full price: time-weight. Bonus, split, consolidation: restate. Rights: TERP factor.
- Convertibles: add back interest after tax and add the shares.
- Options: shares issued less shares bought back at the average price.
- Include only dilutive items, lowest incremental EPS first.
- CAMA 2020: ss. 377(1), 378, 379 to 381, 374(1), 385, 404(7).
Practice questions
These are original questions written in the style of the Institute of Chartered Accountants of Nigeria (ICAN) exam. Try each one before you open the answer. Full model answers follow the written questions.
Recall check: multiple choice
The real ICAN paper has no multiple-choice section. These questions are for quick recall. The written questions that follow are closer to the exam.
Question 1. Basic EPS uses earnings that are:
- Before tax
- Attributable to ordinary shareholders
- Before preference dividends
- Total comprehensive income
Show the answer
B. After the NCI and equity preference dividends.
Question 2. Shares issued at full market price are:
- Restated back to the start
- Time-weighted from the date the money is receivable
- Ignored
- Added at year end
Show the answer
B. No restatement of comparatives.
Question 3. A bonus issue is treated as if issued:
- On the issue date
- At the start of the earliest period
- At year end
- Never
Show the answer
B. The comparatives are restated.
Question 4. The bonus factor in a rights issue is:
- TERP ÷ market price
- Market price before the issue ÷ TERP
- Issue price ÷ market price
- Shares ÷ profit
Show the answer
B. It is applied to the earlier shares.
Question 5. In diluted EPS, interest on convertible loan stock is added back:
- Before tax
- After tax
- Not at all
- Doubled
Show the answer
B. The tax relief is lost on conversion.
Question 6. Options are dilutive when the exercise price is:
- Above the average market price
- Below the average market price
- Equal to par
- Nil only
Show the answer
B. The treasury share method applies.
Question 7. An instrument whose incremental EPS is above basic EPS is:
- Dilutive
- Anti-dilutive and excluded
- Added to the numerator
- A bonus issue
Show the answer
B. It would raise EPS.
Question 8. A cumulative preference dividend is deducted:
- Only if declared
- Whether or not declared
- Never
- Only in a group
Show the answer
B. For equity-classified shares.
Question 9. An alternative EPS may appear:
- On the face of the statement
- Only in the notes, reconciled
- Nowhere
- In place of statutory EPS
Show the answer
B. With the same weighted-average shares.
Question 10. Which section of CAMA 2020 requires the statements to follow IFRS?
- Section 378
- Section 400
- Section 405
- Section 409
Show the answer
A. IAS 33 is part of IFRS.
Written questions
Question 11 (10 marks). (a) Explain how a full-price issue, a bonus issue and a rights issue affect the weighted-average number of shares. (5 marks) (b) Explain how diluted EPS is calculated and why anti-dilutive instruments are ignored. (5 marks)
Question 12 (20 marks). Delta Plc had 2,000,000 ordinary shares at 1 January 20X8. On 1 May it issued 400,000 shares at full market price. On 1 October it made a 1 for 4 bonus issue. Profit after tax was ₦6,600,000. It has ₦10,000,000 of 8% cumulative preference shares classified as equity, with no dividend declared. The EPS reported for 20X7 was ₦2.80. It also has ₦4,000,000 of 10% convertible loan stock (20 shares per ₦100), in issue all year, and 300,000 options at ₦2.50.
The average share price is ₦5 and the tax rate is 30%. (a) Calculate the earnings and the weighted-average number of shares for basic EPS. (8 marks) (b) Calculate basic EPS and the restated 20X7 EPS. (4 marks) (c) Calculate diluted EPS, ranking the instruments. (8 marks)
Question 13 (10 marks). Omega Plc has 1,000,000 shares and profit of ₦3,000,000. It has 200,000 options at an exercise price of ₦3 when the average price is ₦6. It must issue 50,000 shares to a vendor if the share price is ₦8 or more on 30 June next year. The price at the year end is ₦9. (a) Calculate basic EPS. (2 marks) (b) Calculate the effect of the options. (4 marks) (c) Calculate diluted EPS including the contingent shares. (4 marks)
Model answers
Show the model answer to Question 11
(a) Share events (5 marks). A full-price issue is time-weighted from the date the money is receivable. (1.5) A bonus issue is treated as if it had been made at the start of the earliest period, with no time weighting, and comparatives are restated. (2) A rights issue has a bonus element, which is treated like a bonus issue (using market price before ÷ TERP), and a full-price element, which is time-weighted. (1.5)
(b) Diluted EPS (5 marks). Earnings are adjusted for the interest or dividends saved (after tax) and the shares for those that would be issued. (2) Options use the treasury share method. (1) Instruments are ranked by incremental EPS and included from the lowest. (1) Anti-dilutive instruments would raise EPS, so they are ignored because diluted EPS is meant to show the worst case. (1)
Show the model answer to Question 12
(a) Earnings and shares (8 marks).
- Earnings = 6,600,000 − 8% × 10,000,000 (800,000) = ₦5,800,000 (cumulative, deducted though not declared). (2)
- Bonus factor.
5/4 = 1.25. (1) - Jan to April.
2,000,000 × 4/12 = 666,667. - May to September.
2,400,000 × 5/12 = 1,000,000. - Total before the bonus 1,666,667 × 1.25 = 2,083,333. (3)
- October to December.
3,000,000 × 3/12 = 750,000. (1) - Weighted average = 2,833,333. (1)
(b) Basic EPS (4 marks).
- 5,800,000 ÷ 2,833,333 = ₦2.05. (2)
- Restated 20X7 = 2.80 ÷ 1.25 = ₦2.24. (2)
(c) Diluted EPS (8 marks).
- Options.
proceeds 750,000 ÷ 5 = 150,000 bought back; incremental shares 150,000; incremental EPS nil. (2) - Loan stock.
interest 400,000 × 70% = 280,000 - shares 40,000 × 20 = 800,000
- incremental EPS = ₦0.35. (2.5)
- After the options EPS.
5,800,000 ÷ 2,983,333 = ₦1.94, so the loan stock (0.35) is dilutive. (1.5) - Diluted EPS.
(5,800,000 + 280,000) ÷ (2,833,333 + 150,000 + 800,000) = 6,080,000 ÷ 3,783,333 = ₦1.61. (2)
Show the model answer to Question 13
(a) Basic (2 marks). 3,000,000 ÷ 1,000,000 = ₦3.00. (2)
(b) Options (4 marks).
- Proceeds = 200,000 × 3 = 600,000. (1)
- Shares bought back.
600,000 ÷ 6 = 100,000. (1.5) - Incremental shares = 100,000 (earnings do not change). (1.5)
(c) Diluted (4 marks).
- The share price condition would be met at the year end (₦9 against ₦8), so the 50,000 contingent shares are included. (2)
- Diluted EPS.
3,000,000 ÷ (1,000,000 + 100,000 + 50,000) = 3,000,000 ÷ 1,150,000 = ₦2.61. (2)
Pathfinder on Earnings per share
These are the ICAN Pathfinder questions that test this topic. ICAN owns the questions and the suggested solutions, so we point you to them and do not copy them. Open your Pathfinder, attempt each question under exam conditions, then check your answer against the notes above.
We found no stand-alone earnings per share question in the November 2025 or May 2026 Pathfinders. The topic is examinable and links to ratio analysis. Worked examples 1 to 14 show the layouts.
Revise first: Worked examples
Questions test the order in which potential shares are tested. See the section on diluted EPS.
Revise first: Diluted EPS
Source: ICAN Pathfinder, Strategic Business Reporting. Diets covered: No stand-alone EPS question identified in the November Diet, 2025 or May Diet, 2026 Pathfinders.
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