### CFA Practice Question

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### CFA Practice Question

An analyst gathered the following information about a company:

• 01/01/2015 - 50,000 shares issued and outstanding at the beginning of the year
• 04/01/2015 - 5% stock dividend
• 10/01/2015 - 10% stock dividend

What is the company's weighted average number of shares outstanding at the end of 2015?
A. 57,750
B. 52,500
C. 55,000
Explanation: The weighted average number of common shares outstanding is the number of shares outstanding during the year weighted by the portion of the year they were outstanding. Dividends and splits are applied to all shares issued or repurchased and all original or adjusted shares outstanding prior to the split or dividend.

Step 1) Apply the 04/01/2015 dividend to the beginning-of-year shares: Adjusted shares = 1.05 x 50,000 = 52,500.

Step 2) Apply the 10/01/2015 dividend to the adjusted beginning-of-year shares. Adjusted beginning of year shares = 57,750 (= 1.1 x 52,500).

Step 3) Compute the weighted average number of shares: 57,750 x (12/12) = 57,750 shares.