Chap 16 - EPS

Outstanding example issuance or reacquisition of

This preview shows page 1. Sign up to view the full content.

This is the end of the preview. Sign up to access the rest of the document.

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...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online