Question
A convertible debt issue would raise the numerator proportionally more than the denominator and increase EPS. Is it included in diluted EPS?
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Answer
No, it is antidilutive.
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Question
If 50,000 new common shares are issued on July 1, how do they affect weighted average shares for the year?
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Answer
Add 50,000×6/12=25,000 shares.
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Question
Why are common shares weighted by the fraction of the year outstanding in basic EPS?
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Answer
To match EPS with the time shares actually participated in earnings.
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Question
How are stock splits and stock dividends treated when computing weighted average shares?
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Answer
They are applied retroactively to all prior periods.
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