Chap 16 - EPS

Outstanding example issuance or reacquisition of

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Unformatted text preview: te weighted average shares Calculate outstanding on December 31. outstanding Example: Issuance or Reacquisition of Common Stock Reacquisition Jan. 1 to May 1 1,000 x 4/12 = 1,000 May 1 to Nov. 1 2,000 x 6/12 = 1,000 2,000 Nov. 1 to Dec. 31 1,500 x 2/12 = 1,500 Dec. 31 Weighted Average Shares Weighted Dec. 333 250 1,583 Example: Stock Dividend Example: and Stock Split • Assume the following: – Shares Outstanding January 1: – Shares Issued for Exercise of Options on February 1: of – Shares Issued for 10% Stock Dividend on May 1: Dividend – Shares Sold for Cash on September 1: – Shares Repurchased on November 1: Shares – Shares Issued for 3-for-1 Stock Split on December 15: 2,600 400 300 1,200 400 400 8,200 Example: Stock Dividend and Stock Split No. of Stock Shares Dividend Date 1/1-2/1 2,600 x 1.10 2/1 Option 400 2/1-5/1 3,000 x 1.10 5/1 Dividend 300 5/1-9/1 3,300 9/1 Sale 1,200 9/1-11/1 4,500 11/1 Purchase (400) 11/1-12/1 4,100 12/1 Split 8,200 12/1-12/31 12,300 Stock Portion of Weighted Split Average Year x 3.0 x 1/12 = 715 x 3.0 x 3/12 = 2,475 x 3.0 x 4/12 = 3,300 x 3.0 x 2/12 = 2,250 x 3.0 x 1/12 = 1,025 x 1/12 = 1,025 12/31 Weighted Average Shares Outstanding 10,790 Stock Splits & Dividends Stock • All stock splits and stock All dividends must be incorporated into the computation of weighted average shares outstanding. average • This must done for all periods This presented in the financial statements. statements. • Current EPS figures may have to Current be changed in the future as a result of stock splits or dividends. result Dilution of Earnings Dilution • Dilutive Securities: Securities whose assumed exercise or conversion results in a reduction in EPS. in • Antidilutive Securities: Securities whose assumed conversion or exercise results in an increase in EPS. results Diluted EPS Diluted • Presents EPS for complex capital P...
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