ABSTRACT
This chapter examines Coughlan's argument and to explain the justification for using a weighted average in earnings per share (EPS) calculations. The anomaly in using weighted averages is more apparent than real; the use of weighted averages in this and other accounting calculations has an economic rationale. Time weighted averages also have a long history in mercantile calculations. The early 'arithmetics' called this problem 'compound partnership' and 'double fellowship' and many current texts also deal with the subject. The calculation of EPS using the weighted average shares outstanding is similar to the partnership problem and it has essentially the same solution. This connection between weighted averages and interest calculations was recognized long ago, first published in 1695. The early arithmetics called this problem compound partnership and double fellowship and many current texts also deal with the subject. The calculation of EPS using the weighted average shares outstanding is similar to the partnership problem.
