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Hello Sir,
For calculating EPS as in your lecture we need the fraction for rights issue
why they use the fraction here for the bonus shares and also I do not know how they got the fraction of 4/3
Thanks,
Q
Waffle Co had share capital of $7.5 million in 50c equity shares at 1 October 20X6. On 1 January 20X7 it
made an issue of 4 million shares at full market price immediately followed by a 1 for 3 bonus issue.
The financial statements at 30 September 20X7 showed profit for the year of $12 million.
What was the earnings per share for the year? State your answer to two decimal places.Answer
Number of shares
Time
apportioned
Bonus
fraction
Weighted
average1/10/X6 15,000,000 3/12 4/3 5,000,000
1/1/X7 4,000,000
19,000,000
Bonus issue (18,000 / 3) 6,333,333
25,333,333 9/12 19,000,000
24,000,000
EPS = 12 / 24 = $0.50Hi,
the bonus fraction is calculated as the number of shares after the issue divided by the number of shares in issue before. As it was a 1-for-3 then there were three in issue before and 4 after (i.e. 3 old plus the one new one issued).
Thanks
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