Hello fellow AF’ers 44 days left. Time to buckle down. Please help with this qbank question. The following data pertains to the sapphire company: Net income is $15000 5000 shares of common stock issued on Jan 1st 10% stock dividend issued June 1st 1000 shares of common stock were repurchased july 1st 1000 shares of 10%, 100 par preferred stock each convertible into 8 shares of common were outstanding the whole year What is the companys diluted earnings per share? the answer is $1 Please discuss in detail.
1/1 5000 6/1 10% stock dividend *1.1 = 5500 * 12/12 = 5500 7/1 1000 repurchased -> -1000 * 6/12 = -500 total # of shares = 5000 without dilution effect: EPS = (15000 - 1000 * 100 * .1 )/5000 = 5000/5000 = 1$ with dilution: say all preferred is converted. Numerator = 15000 denominator = 5000 + 1000*8 = 13000 EPS = 15/13 > 1$ (anti-dilutionary). so 1$=Diluted EPS.
So stock dividends are calculated as of begining of the year regardless of when they are issued?
that is the definition…always from beginning of period.
Thanks!
finspert Wrote: ------------------------------------------------------- > Thanks! and splits too braaah.