CFA Practice Question

There are 534 practice questions for this study session.

CFA Practice Question

On December 30, 2015 Vidio Company had 1,000,000 shares of common stock, 200,000 of which had been issued on October 1, 2015. The company declared a 2-for-1 stock split on December 31, 2015. The weighted number of shares outstanding for calculation of EPS would be ______.
A. 2,000,000 shares
B. 1,900,000 shares
C. 1,700,000 shares
Explanation: The stock split on December 31st would be restated for the entire year so that there would be 2,000,000 shares outstanding. 400,000 of them would represent the 200,000 issued on October 1st multiplied for the stock split. Since these shares were only outstanding for three months, they would be weighted by 3/12 X 400,000 = 100,000. The 800,000 shares outstanding since the beginning of the year would now be 1,600,000 shares due to the split. 1,600,000 + 100,000 = 1,700,000

User Contributed Comments 6

User Comment
murli Read between the dates! Dec. 30th is 1mn shares and on Dec. 31st a stock split!
danlan (800000+200000*3/12)*2=1700000
volkovv the other way to do it is:
(800,000*8/12+1,000,000*3/12)*2=1,700,000
ehc0791 The key is that 1,000,000 outstanding on 12/30 is not a weighted average number.
bidisha Small correction volkov
It's 9/12 not 8/12 giving 600,000
mali97 good question
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