Earnings per share (EPS) : The amount of earnings made available to each common share is referred to as earnings per share. Use the following formula to determine EPS: Earnings per share } = Earnings available to common shareholders Weighted average number of common shares outstanding = Net income –Preferred dividends Weighted average number of common shares outstanding Stock dividends : Stock dividends are the number of shares issued by a company to the existing shareholders in a proportion equal to the number of shares owned by each shareholder, based on a stock dividend percentage. Stock splits : Stock split is the increase in number of shares due to splitting or decreasing par value of each share. To explain : The treatment of stock dividends and stock options while computing weighted average number of common shares, and comparison of treatment of stock dividends and stock options while computing weighted average number of common shares when additional shares are sold

Question

Want to see the full answer?

Answer 1

Question

Chapter 19, Problem 19.6Q

To determine

Earnings per share (EPS): The amount of earnings made available to each common share is referred to as earnings per share.

Use the following formula to determine EPS:

Earnings per share} = Earnings available to common shareholdersWeighted average number of common shares outstanding= Net income –Preferred dividendsWeighted average number of common shares outstanding

Stock dividends: Stock dividends are the number of shares issued by a company to the existing shareholders in a proportion equal to the number of shares owned by each shareholder, based on a stock dividend percentage.

Stock splits: Stock split is the increase in number of shares due to splitting or decreasing par value of each share.

To explain: The treatment of stock dividends and stock options while computing weighted average number of common shares, and comparison of treatment of stock dividends and stock options while computing weighted average number of common shares when additional shares are sold

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

When calculating the weighted average shares of common stock outstanding, how should companies adjust for stock dividends? O They should be weighted by the number of days outstanding. O They should be considered outstanding at the beginning of the year. O They should be weighted by the number of months outstanding. O They should be considered outstanding at the mid-point of the year.

In computations of weighted average of shares outstanding, when a stock dividend or stock split occurs, the additional shares are a. considered outstanding at the beginning of the reporting period b. weighted by the number of months outstanding. c. considered outstanding at the payment date. d. weighted by the number of days outstanding.

The denominator of Earnings per share computation includes the weighted average number of common shares outstanding. Give three explanations why use the weighted average instead of the year-end common shares outstanding.