Page 32 - FINAL CFA I SLIDES JUNE 2019 DAY 7
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Session Unit 7:
24. Understanding Income Statements
Example 2: EPS with convertible preferred stock, p.63
During 20X6, ZZZ reported net income of $115,600 and had 200,000 shares of common stock and 1,000
shares of preferred stock outstanding for the entire year. ZZZ’s 10%, $100 par value preferred shares are
each convertible into 40 shares of common stock. The tax rate is 40%. Compute basic and diluted EPS.
• Increase in common stock outstanding if the
preferred stock is converted: (1,000)(40) = 40,000
shares.
tanties
Check dilution
