FAR 1 Module 2 Flashcards
Basic EPS formula
Basic earnings per share
Net income - preferred dividends
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WASCO
WASCO: weighted average of common shares outstanding
Note: Remember only preferred dividends and not the preferred dividends plus the common stock should be subtracted
Dilutive EPS formula
Net income - preferred dividends
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WASCO + Dilutive shares
Note: Remember only preferred dividends and not the preferred dividends plus the common stock should be subtracted
10-K & 10-Q Forms. What are due dates?
10k 60-75-90
LA (large accelerated) - 60 days $700M or more
A (Accelerated) - 75 days $75-$700M
O (Other) - 90 days less than $75M
10q 40-45
LA (lg accel) - 40 days $700M or more
A (accel) - 40 days $75-$700M
O (Other) - 45 days less than $75M
Share Dilution
Share dilution occurs when a company issues more stock, reducing current shareholders’ ownership percentage to raise additional funds.
Stock Split
A stock split happens when a company gives current shareholders more shares for free and lowers the value of each share. The total value of all shares stays the same. The entry to note a stock split is mostly just a formality. This means there are more shares available, but shareholders don’t have to pay anything for them. Example 2-for-1 stock split
Note: Par means (stated value)
Dilutive earnings per share effect
Each potentially dilutive security is considered separately for its dilutive effect. The possible adding of the EPS is not added because of the antidilutive rule
What is the stock splits affect with the weighted average?
Under US GAAP, stock split is treated as if it occurred at the beginning of the year when calculating weighted average common shares for EPS.
Convertible bonds
Complex capital structure
As soon as you see convertible think complex capital structure
Becker Olinto
How is common stock treated in Y2 if it was issued in Y1?
Year 1 common stock is carried over into year 2 automatically, unless the company takes action to change the share count
What is treasury stock?
Treasury stock refers to the shares that the companies buy back and holds in its treasury. So it is subtracted when calculated basic EPS. It is still averaged out in the WASCO in months
What are convertible bonds and what is the effect with taxes?
Convertible bonds are taxed
Convertible bonds lead to the conversion price to be used in EPS
Conversion price formula is:
Face value of bond
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Conversion price per share
For which period, in addition to the most recent quarter-end, is a company required to present balance sheets on Form 10-Q?
The company must present a balance sheet as of the end of the preceding fiscal year. This provides a benchmark for comparing the company’s financial condition, and it is required for all Form 10-Q filings regardless of seasonality.