What are 'potential' ordinary shares? In your answer provide three examples to support your explanation. Briefly outline the process (steps) to determine whether 'potential' ordinary shares are in fact, 'dilutive'.
The following information relates to Russell Ltd for the year ending 30 June 2012:
Profit after tax for the Year Ending 30 June 2012
$2 100 000
Dividends on 200 000 convertible cumulative preference shares
The preference shares have been disclosed as equity in the statement of financial position. There were 250 000 fully paid ordinary shares as at 1 July 2011. There were no additional shares issued during the year.
During the year ending 30 June 2012:
Calculate the following showing all steps applied and workings:
(i) Basic earnings per share for the year ending 30 June 2012.
(ii) The diluted earnings per share for the year ending 30 June 2012. Show all workings for each step involved in determining which potential ordinary share is in fact, dilutive.