F1 M2

Question 1

basic EPS formula

Answer 1

net income - preferred dividends/weighted average shares outstanding

Question 2

diluted EPS formula

Answer 2

net income + interest expense on dilutive securities - income tax expense on interest expense/weighted average shares outstanding (including any dilutive securities)

Question 3

weighted average number of common shares outstanding

Answer 3

shares outstanding at beg. of period
+ shares issued during the period (weighted)
- treasury shares purchased (weighted)
+ stock dividends and stock splits (treated as occurred in beg. of period)
- reverse stock splits (treated as occurred in beg. of period
= WACSO

Question 4

what is form 8-k?

Answer 4

-discloses material events such as:
1) bankruptcy
2) changes in public accounting firm used to audit company
3) changes in securities and trading markets
4) changes in or election of directors and officers
5) amendments to bylaws or articles of incorporation
6) changes in fiscal yr
7) F/S changes
8) material definitive agreements

Question 5

what is form 10-Q?

Answer 5

quarterly financial statements
includes:
Part 1 Item 1: F/S (unaudited)
Part 1 Item 2: MD&A
Part 1 Item 3: Quantitative and Qualitative disclosures of market risk

Question 6

what is form 10-k?

Answer 6

annual financial statements
includes:
Part 2 Item 7: MD&A
Part 2 Item 7a: Quantitative and Qualitative disclosures of market risk
Part 2 Item 8: F/S and supplementary data

Question 7

what are the filing deadlines for form 10-K?

Answer 7

large accelerated filers: 60 days
accelerated filers: 75 days
other filers: 90 days

Question 8

what are the filing deadlines for form 10-Q?

Answer 8

large accelerated filers: 40 days
all other registrants: 45 days

Question 9

how are preferred dividends deducted from net income

Answer 9

For noncumulative P/S: P/S declared not when paid
For cumulative P/S: P/S regardless if its paid or declared

Question 10

what if a stock split or stock dividend occurs after the end of the period but before the F/S are issued?

Answer 10

those shares should be included in outstanding shares for EPS calculation for all periods presented

-same goes for reverse stock splits

Question 11

computing additional shares formula

Answer 11

number of shares - (number of shares * exercise price/avg market price)

Question 12

when is the option/warrant in the money? And what does that mean?

Answer 12

when the avg market price > exercise price
means proceeds not enough to buy back shares, so it’s dilutive to EPS

Question 13

when is the option/warrant out of the money? And what does that mean?

Answer 13

when the avg market price < exercise price
means proceeds are sufficient to buy back shares, so it’s antidilutive to EPS

Question 14

what are some potentially dilutive securities?

Answer 14

1) convertible securities
2) warrants and other options
3) contracts settled in cash or stock
4) contingent shares

Question 15

what are contingent shares?

Answer 15

-do not require cash consideration and depend on a future event occurring when condition are met
-contingent shares (if diluted) included in basic EPS calc when issuance conditions met

Question 16

EPS disclosures

Answer 16

1) recon of numerators and denominators of basic and diluted per share
2) effect of P/S dividends to get income available to C/S holders
3) securities that could potentially dilute EPS that were not included because currently antidilutive
4) transactions that could impact actual and potential common shares outstanding