I thought I had this down,just revisiting a few questions and according to the schweser questions. A stock split is treated as if it was done at the start of the period and also effects of stock dividends are applied retroactively at the beginning of the year. Up to now I had weighted these, as in 10% stock divi on 01 june of 100,000 shares…I was taking 10000 x 7/12… I looked through the cFA book and EPS seemed pretty thin, could somebody please clarify when you weight these additional dilutive stocks and when you consider them from the start of that accounting period. many thanks…
stock dividends are different than stock splits. when there is stock splits, the eps does not change. The accounting treatment is essentially different. For stock dividends, the firm pays the dividends from re-tented earnings thus decrease earning per share. I don’t remember how it works in in detail, and I have never encountered a question that asks both at the same time.
“when there is stock splits, the eps does not change” - Stock Splits actually dillutes the EPS. When there is a stock split, the weighted average number of shares outsanding increases ( the dinominator ) thereby dilluting the EPS. Issue of stock dividens is similar to stock splits. You will have to consider both as it was done at the begining of the year while calculating Weighted Avg. shares outsanding. So, it is 100,000(1.10) = 110,000 shares. cheers, Sam