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QuestionsCategory: Financials QuadrantFinancial Quadrant
Wilfred Yang asked 1 year ago

Hi
Two questions here:
Question 1:
I like to ask how the diluted EPS became $43.70 in the alphabet example.
Total undistributed earnings: $$13,200 + $2,072 + $15,464 = $30736 mil
Total number of share outstanding: 346,101 + 46,864 + 357184 = 750,149,000
EPS = $40.97
 
Question 2
I found the explanation for diluted shareholding explained in the Annual Report. It explains it as “The computation of the diluted net income per share of Class A common stock assumes the conversion of Class B common stock, while the diluted net income per share of Class B common stock does not assume the conversion of those shares.”
Hence if we just add up all the number of shares used in per share diluted EPS computation as mentioned in the video, we would essentially be double counting as the Class B shares are counted twice. Is that an issue?

3 Answers
Victor Chng answered 1 year ago

Hi Wilfred,

Q1: The figure of $43.7 is based on the earnings divided by the weighted average number of shares. The figure is usually calculated by the company, as they know the movement of the shares throughout the year. You can see the explanation here. http://www.investopedia.com/ask/answers/12/weighted-average-shares-basic-weight-shares.asp

You can easily calculate the weighted average shares by back calculating. For this case, you just need to take 30,736m divided by 43.7 which give 703.34 shares. It does not matter if you are using weighted number of share or the normal number of shares. The key is that you have to be consistent when using it. If you decided to use weighted numbers of share then you have to make sure the rest of the years, you are using weighted number of shares.

Q2:That is because the B shares is not publicly traded and it is owned by the owner of Alphabet. You can read more about it here.

http://www.investopedia.com/articles/markets/052215/goog-or-googl-which-google-should-you-buy.asp
http://www.investopedia.com/terms/c/classbshares.asp

.

Anthony Lim answered 6 days ago

Hi Victor/ Rusmin,
Using Alphabet as an example. I tried to fill up the excel template for the Financial Analysis template and attached it.
I just like to have a feel of the amount of work required to analyze 1 company and the learnings that I can derive from this exercise. 
Questions as below:

  1. No. of Shares (millions) – where to find this? What is the keyword to find? Is it different from different annual report on each year? 
  2. Profit attributable to Shareholder – is this net income?
  3. Trade Receivables – is this Account Recievables? If not, what is the keyword to find?
  4. Trade Payables – is this Account payable?
  5. Total Debt – is this long term debt?

 

Attachments
Victor Chng answered 5 days ago

Hi Anthony,
 

  1. The keyword should be “number of shares” but it may differ from annual report.
  2. Yes, when taking net profit always use profit attributable to shareholders
  3. Yes account receivables is trade receivables
  4. Yes account payable is trade payable
  5. Total debt is the total of short term and long term debt.