florinpop Wrote: ------------------------------------------------------- > i still think the correct ans is C ^ me too…
I believe when they say July – Nov 36000 , they mean the average number of shares outstanding during this period. Which means the dividend should have been taken care of in this number 36000. Hence no adjustments here. Only adjustment needed would be to the previous two periods. What do you think? BTW with this assumption the answer comes ~2.75. However since the source did not solve it properly, its not the answer which is imp here but the method to be used if such a question comes up in the exam.
C
I’ll buy what reema explained.
reema agree except july gets adjusted
florinpop Wrote: ------------------------------------------------------- > reema agree except july gets adjusted Yeah it gets adjusted. But what im saying is that, this adjustment is already made in the quoted figure for July-Nov. Otherwise how can we know what was the exact figure for July to make the adjustment to?? Am i making sense to you?
yes i think we need to adjust Jan-July included leave August-Dec alone as they are already adjusted if you do that the eps si 2.89
ok agreed but i really donot know how to account for the shares outstanding in July(only). Can you share your calculation? Thanks
in july there were 36000 but the stock dividend was in august that means that july has 43200 shares Re: EPS calc Posted by: florinpop (IP Logged) [hide posts from this user] Date: November 18, 2007 11:38PM i get jan- feb 28800 march june 35280 july 43200 august-nov - 36000 dec 35040 average 35080 ? dont let yourself fooled that they put July with the rest of the months they still need to be acccounted differently
reema Wrote: ------------------------------------------------------- > ok agreed but i really donot know how to account > for the shares outstanding in July(only). > Can you share your calculation? > > Thanks 24000 * 2 + 4800 * 2 = 48000 + 9600 29400 * 4 + 5880*4 = 117600 + 23520 36000 * 5 + 7200*1 = 180000 + 7200 35040 * 1 = 35040 57600 + 141120 + 187200 + 35040 = 420960 101504*12/420960 = 2.893500?? = C? - Dinesh S
yeh the answer is B… remember that to calculate EPS, we want the Weighted Average number of shares outstanding for the year… NOT just the balance as at the end of the year… so, work it out sequentially… start with 24,000 must have issed 5400 in march then issued 6600 in july then stock dividend was in august, so only applies to all previous shares… so far we have: [24,000 +5,400(10/12) + 6600 (6/12)]*1.2 = 38,160 now, in december there must have been a stock buyback of 3120, so: Weighted Avg = 38160 - 3120 (1/12) = 37,900 so, EPS = 101,504/37900 = 2.67 ans is B
totally agree with you
Bluey 1.8T, The answer is B, I feel there is a problem in your calc. Here are my steps Entire Year 24,400 Issued on March 1st 5,400 Issued on July 1st 6,600 Buyback on Dec 1st -960 Now lets adjust this for stock divided issued on aug 1st. Entire Year 24,400 * 1.2 = 28,800 Issued on March 1st 5,400 * 1.2 = 6,480 Issued on July 1st 6,600 * 1.2 = 7,920 Buyback on Dec 1st -960 = -960 And now adjust the above numbers for the entire year Entire Year 28,800 Issued on March 1st 6,480 * 10 / 12 = 5,400 Issued on July 1st 6,600 * 6 / 12 = 3,960 Buyback on Dec 1st -960 * 1 / 12 = -80 Weighted average # of shares = 38,080 So EPS = 101,504 / 38,080 = 2.6655. Please correct me if I am wrong.
hmmm the difference is in our calculation of the buyback…
Are convertible preferred shares assumed to pay no dividends?
I guess I should clarify. This is the question I have. L.J. Pathmark reported net earnings of $250,000 for the year ending 20X6. The company had 125,000 shares of $1 per value common stock and 30,000 shares of $40 par value convertible preferred shares outstanding during the year. The dividend rate on the preferred stock is $2 per share. Each share of the convertible preferred stock can be converted into two shares of L.J. Pathmark Class A common shares. During the year no convertible preferred stock was converted. What is L.J. Pathmark’s basic earnings per share? A. $0.89 per share B. $1.52 per share C. $1.76 per share D. $2.00 per share I’m a little confused for some reason and I don’t know if I’m confusing myself or what. I want to see if you guys solve it the same way I did…
basic EPS is: (net income available to COMMON shareholders) / Weighted avg shares outstanding so… 250,000 - 2(30,000) ________________ 125,000 = 1.52 ans B preferred stock always pays a set dividend, to the PREFERRED shareholder… this is why we have to take away the amount from net income, since those dividends are not available to the COMMON shareholders
Ok so my question is this. If each convertible preferred share can be converted into 2 common shares, why are we not taking that into account in the denominator?
bcos it is basic EPS they are asking for, not diluted EPS
oh. crap. Thanks cpk.