1

I have started teaching myself basic business stuff and have a question regarding calculating earnings per share.

Q:
[bunch of numbers for revenue, expenses...]

At the beginning of year: 80,000 shares outstanding.
In June, 20,000 shares sold for $8/share.

What is the EPS?


I understand EPS = net income / time average of total shares outstanding.

However I have two questions:
1. Is the money from the shares sold added to net income?
2. Is the total number of shares after the sale of shares 100,000?

5

Assuming you are saying that the company issues 20,000 additional shares of its own stock and sells them for $8 each:

  1. The money from the sale is not income and not part of earnings. It is capital and appears on the balance sheet as part of shareholder's equity.

  2. With no other transactions, yes, the total of shares outstanding is increased by 20,000 to 100,000.

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