In SCHWESER Notes, reading 32 of financial reporting and analysis, P 66, about calculation of weighted average shares outstanding, it said ‘The weighting system is days outstanding divided by the number of days in a year, but on the exam, the monthly approximation method will probably be used’. What does it mean on the monthly approximation method??? Thanks a lot…

Well if a company has a million shares outstanding, and issues 100,000 more on July 1, the calculation would be (1 million divided by 365, + 100,000 divided by the amount of days in July-December) times 365= roughly 1,050,000. Monthly approximation is (1MM/12 + 100K/6) *12 = 1,050,000. Short answer is you divide by months outstanding and then multiply by 12. With days it’s divided by days outstanding, then multiplied by 365.

So that’s exactly the way showed in notes of example?!

Its actually 1MM(12/12) + 100,000(6/12) = 1,050,000 the 6 comes from 6 months left in the year. Numbers mixed up from ^^.