Retroactive recognition is given to stock dividends and stock splits on common stock when computing earnings per share. Why?
Because the shares are given to every investor for free.
Company had 100 share $1 EPS mean $200 earnings
Now has 200 shares $200 earnings EPS = $0.5
There is no dilution of a particular set of investors.
Retroactive recognition of stock dividends and stock splits in EPS calculations ensures consistency by adjusting for changes in the number of outstanding shares over time. This allows for accurate comparisons of earnings performance across different reporting periods.
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Thanks!