Earnings per share and discontinued operations
The lower portion of the 2006 income statement for McDonald”s follows (dollars in millions):
|
Income from continuing operations |
$2,875.0 |
|
Income from discontinued operations net of taxes |
671.2 |
|
Net income |
$1,544.2 |
|
Basic net earnings per share: |
|
|
Continuing operations |
$2.33 |
|
Discontinued operations |
0.54 |
|
$2.87 |
|
|
Diluted net earnings per share: |
|
|
Continuing operations |
$2.30 |
|
Discontinued operations |
0.53 |
|
$2.83 |
REQUIRED:
a. Why is there a distinction between net earnings from continuing operations and net earnings from discontinued operations?
b. Estimate the number of common shares outstanding.
c. Why is there a distinction between basic net earnings per share and diluted net earnings per share?
d. Estimate the number of common shares that would be outstanding if all potentially dilu-tive securities were converted to common shares.