Pro forma earnings per share is the calculation of EPS assuming a merger and acquisition takes place and all financial metrics, as well as the number of shares outstanding, are updated to reflect the transaction.

Basic EPS is calculated by dividing a firm’s net income by its weighted shares outstanding. The pro forma EPS, on the other hand, adds the target firm’s net income and any additional synergies or incremental adjustments to the numerator, while adding new shares issued due to the acquisition to the denominator.

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