CFA Practice Question

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CFA Practice Question

When computing the weighted average number of shares outstanding during the year, which of the following is a mid-year event that must be treated as occurring at the beginning of the year?

A. Purchase of treasury stock
B. Issuance of stock warrants
C. Sale of additional common stock
D. Declaration and payment of a stock dividend
Correct Answer: D

Stock dividends are always treated as if they occurred at the beginning of the year.

User Contributed Comments 4

User Comment
Saxonomy Calculation-wise, A and B both involve realizing a decrease in outstanding shares, followed by a weighted average calculation. Right?

Also, since warrants are usually only offered as "decorations" to make bigger deals more marketable or attractive, can we assume issuing warrants will not change the numerator (i.e. net income) because very few people actually pay $$$ to buy warrants?

Thanks for your inputs.
gulfa99 A is dillutive so inclusive in the weighted average.
Stock Warrants are dillutive if they are exercised otherwise treat it as non dillutive
johntan1979 Splits and reverse splits as well - beginning of year regardless of when declared.
Seancfa1 Thank-you Johntan1979
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