Page 26 - FINAL CFA I SLIDES JUNE 2019 DAY 7
P. 26
Session Unit 7:
24. Understanding Income Statements
Effect of Stock Dividends and Stock Splits, p.58
A stock dividend -distribution of additional shares proportional to their current & holding;
A stock split -the division of each “old” share into a specific number of “new” (post-split)
shares.
Both ensure each shareholder has more shares but the same % of the total outstanding.
tanties
In computing EPS, shares issued or retired after the stock dividend are not affected.
Example: Effect of stock dividends, p.58. During the past year, R & J, Inc. had net income of $100,000,
paid dividends of $50,000 to its preferred stockholders, and paid $30,000 in dividends to its common
shareholders. R & J’s common stock account showed the following:
Compute the weighted
average number of common
shares outstanding during the
year, and compute EPS.
