### CFA Practice Question

There are 534 practice questions for this study session.

### CFA Practice Question

At the beginning of 2015, Osami Corporation had 1.4 million shares of common stock outstanding and no preferred stock. At the end of August 2015, Osami issued 1.2 million new shares of common stock. If Osami reported net income equal to \$7.2 million, what were its earnings per share (EPS) for 2015?
A. \$3.33
B. \$2.77
C. \$4.00
Explanation: Basic EPS = earnings available to common shareholders divided by the weighted average number of common shares outstanding. With no preferred shareholders, all net income is available to the common shareholders. The weighted average number of shares outstanding equals the original 1.4 million shares plus 4/12 of the additional 1.2 million shares. The 4/12 weighting on the new shares is because the new shares were only outstanding 4 months of the year. Thus, the weighted average number of shares outstanding is [1.4 + (4/12)(1.2)] million = 1.8 million shares. So, basic EPS = \$7.2 million / 1.8 million = \$4.00.