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Basic Question 10 of 40
The following information pertains to the QRK Company:
- One million shares of common stock outstanding at the beginning of 2011
- 200,000 shares issued on the last day of March
- 500,000 shares issued on the last day of June
- 800,000 shares issued on the last day of September
What is the number of shares that should be used to compute 2011 earnings per share for the QRK Company?
User Contributed Comments 14
| User | Comment |
|---|---|
| haarlemmer | Watch out, the last day of!!! |
| mikaelian | Should 800,000 be multiplied by 10/12 - how did they get 200,000 for end-of-September? |
| mikaelian | oops, sorry disregard - it's 3/12 x 800,000 |
| bokica | basicly, issued on March 31st or April 1st is the same thing??? Does March has 31 day at all :0 )? |
| omer123 | Shares should be weighted according the number of months remaining in a year. End of March means 9 months remaining, hence, 9/12. |
| eb2568 | since they are issued on the last day of the months, the effective date is essentially the first on the next month |
| tonypractice | step 1: total shares outstanding x % of year outstanding = weighted number of shares outstanding step 2: perform step 1 for each new share issue during the year [since the total shares outstanding will change] step 3: sum the product from each step [so you get the weighted average # of shares outstanding] |
| bahamas | check previous question for how to do it on the hp 12c, real easy that way. |
| johntan1979 | If you do this, you get almost the same answer: 1 mil x 89/365 + 1.2 mil x 91/365 + 1.7 mil x 92/365 + 2.5 mil x 93/365 = 1.6085 mil |
| gill15 | I wouldnt use the calculator. It's very simple math 1(12/12) + 200000(9/12) + 500000(6/12) + 800000(3/12) math doesnt get any easier then that on a calculator |
| schweitzdm | Thanks Gill. That explanation is so much easier to follow! |
| nascfa | There's a mistake in the explanation, it should say 200,000 shares not 150,000. |
| nascfa | nvm |
| Fortschrit | Thanks Gil! |
I am happy to say that I passed! Your study notes certainly helped prepare me for what was the most difficult exam I had ever taken.
Andrea Schildbach
Learning Outcome Statements
describe how earnings per share is calculated and calculate and interpret a company's basic and diluted earnings per share for companies with simple and complex capital structures including those with antidilutive securities
CFA® 2024 Level I Curriculum, Volume 2, Module 2.