- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 2. Analyzing Income Statements
- Subject 5. Earnings per Share

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**CFA Practice Question**

What adjustment needs to be made when computing the weighted average number of shares of common stock outstanding for a company whose shares were issued on April 1? The number of shares issued must be ______

B. multiplied by 9 and then divided by 12.

C. divided by 12 and then multiplied by 3.

A. added directly to the numerator of the earnings per share equation with no adjustment needed.

B. multiplied by 9 and then divided by 12.

C. divided by 12 and then multiplied by 3.

Correct Answer: B

To find the weighted average number of shares outstanding per month, the number of shares outstanding or issued must be multiplied by the number of months remaining in the year (April to December = 9 months), totaled, and then divided by 12 (months).

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**User Contributed Comments**
2

User |
Comment |
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teddajr |
Suppose the company started operation on April 1, then should there be any weighted adjustments? Should not the total outstanding, as in the above situation, be used instead of Weighted Avg ? |

Drzewes |
there's a difference between company which issued its shares in the mid of the year and had EPS = 2 dollars and similar company that issued its shares at the beginning of the year and had EPS= 2 dollars |