Basic EPS ( Schweser note) beginning, reading, question, regarding

water2012

I am reading Schweser note, book 3 and have a question regarding to Basic EPS calculation at page 64. In the example, when calculating "weighted avg number of common shares outstanding", shares outstanding all year=10000x12 and shares outstanding 1/2 year is 2000x6.

Anyone has an idea why multiplication is used here while the question states there are 10000 shares outstading at the beginning of the year.

Many thanks for your help.

Jolyn

That is just their recommended method for solving this type of problem. That is a very basic example so you could just take the(10,000 * 1) and add (2,000 * 0.5) and get the same thing.

It's better to stick with their method because when they make the question more complicated (splits, stock dividends, different things having different amount of months outstanding) it will be easier to solve. See the next example on page 65.

Good Luck

Ionutzakis

Got it. Thanks for ur response cjb1010